By Geoffrey Smith
Investing.com -- The dollar was little changed in early trade in Europe on Thursday, with the market apparently content to wait for U.S. GDP figures before taking new positions.
By 02:55 ET (07:55 GMT), the dollar index, which tracks the greenback against a basket of six advanced economy currencies, was essentially flat at 101.39. Individual crosses were no more exciting, with the euro rising less than 0.1% to $1.0964 and the pound also up less than 0.1% at $1.2407.
The U.S. economy is expected to have slowed in the final quarter of last year, as high inflation and rising financing costs ate into consumer spending. However, the easing of supply chain bottlenecks and a fall in energy prices toward the end of the year is expected to have lent some support, along with a labor market that has conspicuously failed to weaken much.
Analysts expect growth to slow to an annualized rate of 2.6% from 3.2% in the third quarter.
The Bank of Canada's announcement that it will 'pause' interest rate hikes after Wednesday's 25 basis point increase has raised speculation that the U.S. Federal Reserve will soon do likewise, keeping the dollar under pressure.
Markets are pricing in a similar pause from the South African Reserve Bank after its meeting later Thursday, where it is expected to raise its prime rate by 50 basis points to 7.5%.
"The rand has been underperforming this year and one would have expected the huge reversal in USD/CNY to be dragging USD/ZAR much below 17.00," said ING's Chris Turner in a note to clients. "That has not happened, perhaps because of the weak domestic demand outlook in South Africa amid ongoing challenges in energy supply."
However, Turner reckoned that the softer dollar environment and the Chinese economic reopening should compose "a bullish cocktail for the rand", noting that both factors should support demand for South Africa's commodity exports. The rand was flat at 17.099 to the dollar, having traded sideways since late November.
Elsewhere, "quiet periods" in advance of central bank meetings in the U.S., euro zone, and U.K. next week are ensuring that there are no comments from central bank officials to trade off. Markets are currently pricing in another 100 basis points of tightening from the ECB at its next two meetings, while the outlook for the Bank of England is less clear, given the three-way split in the Monetary Policy Committee's decision at its last meeting.