By Charalampos Pissouros, Senior Investment Analyst at XM.com. An original version of this article can be found here.

The U.S. dollar traded lower against most of its major peers on Wednesday and continued drifting south today as well.

It seems that with the ongoing uncertainties surrounding the world’s biggest economy, traders are finding it hard to trust the greenback as a safe haven.

Yesterday, the U.S. House of Representatives narrowly passed a bill to raise the government’s debt ceiling, but the bill is not expected to pass the Senate, and President Biden said he would veto it if it did.

On top of that, U.S. government officials said that they will not intervene to save First Republic Bank, leaving investors on the edge of their seats in anticipation of whether the bank can find buyers for its assets.

Above: The Pound to Dollar exchange rate at daily intervals.

As if all this was not enough to upset dollar traders, the Atlanta Fed GDPNow estimate for Q1 GDP was revised sharply down to 1.1% quarter-over-quarter (seasonally adjusted annual rate) from 2.5% just a week ago, which shifts the risks surrounding today’s official GDP data to the downside.

Perhaps the estimate was revised lower after the durable goods orders data for March were incorporated into the model.

Orders excluding defence and aircraft fell more than expected, with all the February figures being revised lower.

Today, the GDP data is expected to show that the US economy grew 2% in the first three months of 2023, but a downside surprise could keep investors uneasy and allow them to maintain bets with regard to rate reductions by the Fed later this year.

According to Fed Funds futures, they remain confident that policymakers will deliver another 25bps hike when they meet next week, but they expect more than 50bps worth of rate reductions by the end of the year.

So, a disappointment in today’s data could keep the dollar under pressure.

Even if the data surprises to the upside, rate-cut bets are unlikely to vanish, and any dollar recovery may remain limited and short-lived.

With the ECB expected to increase rates by another 75 basis points this year, euro/dollar may be poised to continue drifting north for a while longer.

Speaking about central banks, the BoJ will announce its policy decision tonight, the first under Kazuo Ueda’s leadership.

With Ueda repeatedly noting that there is no rush to alter current policy settings, no change is expected at this gathering and thus, investors may be on the lookout for clues and hints on when and what kind of tightening the Bank could deliver in the coming months.

At his inaugural news conference on April 10, Ueda said that the slide in U.S. and Japanese yields after the financial turmoil, decreased the urgency to tweak yield curve control.

So, anything suggesting that the Bank will stay the course through the summer may disappoint those expecting action soon and thereby hurt the yen.

The opposite may be true if policymakers offer hints that another tweak may be appropriate at the upcoming meetings.

In the equity sphere, the anxiety continued to weigh on the Dow Jones and the S&P 500, with both indices ending another day in the red. However, the Nasdaq gained nearly 0.5%.

Although the tech-heavy index was boosted by a jump in tech stocks, the others were pulled lower by weakness in economically sensitive sectors such as industrials.

That said, with the Fed expected to cut rates later this year and the bar for this earnings season being set so low that it barely leaves room for a colossal disappointment, any further declines in equities could stay in check.

Oil prices dropped by almost 4% yesterday despite data revealing that US crude inventories fell more than expected last week.

This highlights that investors are more concerned about the likelihood of a potential recession, which could dent future fuel demand despite signs of improvement in the short run.