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Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose.

S&P 500 falls, US dollar appreciates after moderate GDP growth

Explore recent shifts in financial markets, from the S&P’s minor pullback and the US dollar's peak against the CAD, to key economic indicators like the revised Q4 GDP growth rate.

Source: Bloomberg

Data current as of 2/28/2024

Key points

  • Stocks edge lower after new highs: (1:29)
  • US dollar moves back to highs: (2:46)
  • Q4 GDP revised slightly lower to 3.2%: (3:51)
  • Inflation should tell us more: (6:00)
  • Interest rate cuts still likely in June: (7:48)

US stocks take a breather after climbs

The S&P 500 experienced a minor pullback midweek following the achievement of new all-time highs, highlighting the volatile nature of stock markets. Such retracements are not uncommon as investors often reassess positions and take profits after significant rallies. This slight downturn reflects the market's natural ebb and flow, underscored by a continuous assessment of value, growth prospects, and external economic factors.

US dollar appreciates against the Canadian dollar

The US dollar has notably ascended to new year-to-date heights, with a remarkable performance against the Canadian dollar, reaching above 1.3600. This surge underscores the greenback's appeal amidst various global uncertainties, including differing economic outlooks among countries, variations in commodity prices, and shifts in trade dynamics. The USD's strength is a testament to its role as a safe haven for investors seeking stability in times of economic ambiguity.

US economic indicators: GDP and inflation

Recent revisions to the US GDP for Q4 2023 indicate a slight downward adjustment to 3.2%, a minimal shift that hints at the underlying resilience of the American economy. Although expectations were 3.3%, the slight tick lower did not appear to affect US dollar prices. Additionally, inflation, a critical parameter for economic health and monetary policy, is under scrutiny, with Core PCE expected to decrease for the 12th consecutive month. This anticipated reduction in inflation could have significant implications for future interest rate decisions by the Federal Open Market Committee (FOMC).

Looking ahead: interest rate cut expectations

The FOMC's June meeting is drawing increased attention, with current probabilities from the CME's FedWatch tool favoring a 25 basis points cut in interest rates. Such a move would be pivotal in adjusting monetary policy in response to evolving economic indicators, particularly if inflation trends downward as expected towards 2%. This potential rate cut reflects the balancing act central banks face in fostering economic growth while maintaining price stability.

The recent movements in stock prices, the US dollar's performance, and revisions in economic forecasts encapsulate the multifaceted nature of financial markets. Investors and policymakers alike navigate through a maze of economic data, market sentiment, and global events to make informed decisions. As we look forward to more clarity from upcoming economic reports and central bank meetings, the interplay between market dynamics and economic indicators remains central to understanding the path ahead.

How to trade US dollar

  1. Open an account to get started, or practice on a demo account
  2. Choose your forex trading platform
  3. Open, monitor, and close positions on USD pairs

Trading forex requires an account with a forex broker like IG. Many traders watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. See our Summary Conflicts Policy, available on our website.

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