The US dollar is at the best levels of the day as the euro and pound fall to the wayside.
The bond market is offering the dollar some support with 2-year yields up 2.6 bps and 30s up 5.1 bps in a moderate bear steepener. Further pressure on yields could come from oil, which is now positive on the day at $74.68 from a low of $73.41.
The euro was already down 30 pips on the day to 1.0850 before the release of January consumer confidence but fell further after the report showed a decline to -16.1 from -15.0. The impact of higher rates is biting the eurozone economy, though there are still some dividends from lower energy prices.
The latest leg lower in EUR/USD has sent the pair to its lowest since mid-December.
Meanwhile, cable still has plenty of room before the lows of the year but it's sagging today.
The US dollar is being lifted by a a shift in the market regarding the likelihood of a March rate cut. At the turn of the year it was priced as a certainty but that's now fallen to a 42% probability. It will take a turn lower in inflation or jobs to get there but it underscores how sensitive the US dollar will be to coming economic data.
Tomorrow we get the US services and manufacturing PMIs from S&P Global, then on Thursday we get the PCE report. For more, see the economic calendar.
Another positive driver for the US dollar this year has been USD/JPY. The BOJ met today and left interest rates unchanged, as expected. However Ueda offered hints of a coming exit from negative rates as he said that hikes would still leave them with stimulative policy. That initially caused a drop in USD/JPY but it was quickly picked up. That's been the theme in almost every trading day for USD/JPY this year, with that pair now up 800 pips year to date.
