Pound Stays Strong, Euro Slips, US Dollar Continues to Climb

Pound (GBP) Stays Strong following Inflation Data

The Pound (GB) firmed through yesterday’s session, still propelled by the tailwinds from Wednesday’s impressive inflation data.

As the day went on the Pound fell sharply amid some profit-taking, but managed to bounce back, despite covid cases rising ‘exponentially’ across England, perhaps buoyed by reports that UK citizens who are fully vaccinated may soon be able to travel to amber-list countries.

Looking ahead, the Pound is likely to take a hit today from an unexpected contraction in UK retail sales. Last month’s domestic sales figures were expected to rise by 1.6% but instead fell by 1.4%.

Euro (EUR) Slips on Demand for USD

The Euro (EUR) slipped against most of its counterparts yesterday, despite inflation rising to 2% last month, as per market forecasts.

Construction data was also positive for the Eurozone, with output increasing by a huge 42.3% in April, just above expectations of a 40% jump.

These strong data releases likely limited the downside in EUR, which is still facing pressure by the surge in demand for the US Dollar (USD) following the Federal Reserve’s hawkish policy announcement.

Turning to today, the Euro could remain muted if USD can sustain its current upside.

US Dollar (USD) Continues Climbing on Fed Announcement

The US Dollar (USD) maintained its upward trajectory yesterday following the Federal Reserve’s switch to a more hawkish stance on Wednesday evening.

Following its interest rate policy decision, the Fed signalled that it would likely raise rates and taper bond buying sooner than it had anticipated, which sent the US Dollar skyrocketing.

With demand high, the US Dollar managed to shake off an unexpected rise in jobless claims last week – the first increase in over a month – which did little to dampen investors’ appetites for USD.

There are no notable data releases from the US today, so the ‘Greenback’ will likely be moved by market sentiment, with the potential for USD to hold its high ground.

Canadian Dollar (CAD) Muted by Disappointing Data

The Canadian Dollar (CAD) was mostly subdued through yesterday’s session, weighed down by the current strength in the US Dollar and underwhelming ADP employment figures, which came in at 101,600 – less than half the expected 250,000 increase.

WTI crude prices are likely to drive CAD prices through today, with WTI crude on the rise again after dropping yesterday. If crude prices continue to climb, the oil-sensitive ‘Loonie’ could make some gains.

Australian Dollar (AUD) Weakens amid Risk-Off Mood

The Australian Dollar (AUD) ticked lower in overnight trade, as demand for the US Dollar and a bearish market mood continued to weigh on the risk-sensitive ‘Aussie’.

New Zealand Dollar (NZD) Dips on USD Strength

The New Zealand Dollar (NZD) also trended lower overnight, pressured by the strength in USD and the prevailing risk-off sentiment.

Samuel Birnie

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