US Dollar Tumbles following Fed’s Dovish Decision

Pound (GBP) Directionless in Absence of Data 

The Pound (GBP) had a mixed day of trading yesterday, as a lack of major data releases left Sterling without any clear directional bias. 

GBP was supported, however, by news that the UK will ease travel rules for EU and US arrivals, which could help boost the UK’s summer tourism industry. 

This morning’s consumer credit figures could give Sterling a lift, as consumer borrowing is expected to have more than doubled from May to June. Such a result would suggest that confidence and spending are increasing among UK citizens, adding to the country’s economic optimism. 

Euro (EUR) Muted as Consumer Confidence Misses Forecasts 

The Euro (EUR) was fairly subdued through yesterday’s session, after consumer confidence reports for both Germany and France printed below expectations. 

EUR investors were also reluctant to place any aggressive bets ahead of the Federal Reserve’s interest rate decision, due to the Euro’s strong negative correlation with the US Dollar (USD). 

Today the Euro may initially benefit from a weaker US Dollar as well as Germany’s unemployment rate, which is forecast to drop. German inflation and European economic sentiment may also support the single currency this afternoon. 

US Dollar (USD) Slides on Fed’s Dovish Tone 

The US Dollar (USD) initially struggled to find a clear path yesterday, with the looming Federal Reserve decision causing hesitancy among USD investors

Following its decision to keep interest rates at a record low, the Fed struck a broadly dovish tone. Fed Chair Jerome Powell said that the US economy is ‘still a ways off’ from making the ‘substantial further progress’ required to begin tapering.  

In response the US Dollar slid, hitting a one-month low against the Pound and a two-week low against the Euro. 

The ‘Greenback’ may struggle this morning, but this afternoon’s jobless claims and GDP growth rate from the US could help it to recover somewhat. 

Canadian Dollar (CAD) Firms on Canada’s CPI  

The Canadian Dollar (CAD) climbed yesterday after Canada’s inflation rate came in at 3.1% – slightly below expectations but still above the Bank of Canada’s (BoC) target – suggesting an optimistic economic outlook. 

The commodity-linked ‘Loonie’ could make more gains today, buoyed by the current USD weakness and rising oil prices. 

Australian Dollar (AUD) Fluctuates on Covid Concerns 

The Australian Dollar (AUD) had a mixed session overnight, as stronger-than-expected export prices were offset by the recent lockdown extension in Sydney. 

New Zealand Dollar (NZD) Firms despite Lacklustre Data 

The New Zealand Dollar (NZD) trended higher in overnight trade, despite a surprise slump in business confidence, boosted by the US Dollar’s weakness and rising commodities prices. 

Samuel Birnie

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