US Dollar Jumps as Fed Hints at Rate Hikes Next Year

Pound (GBP) Dips on Continuing Gas Crisis 

The Pound (GBP) fell yesterday as growing fears over the UK’s energy crisis drained GBP appeal. 

Despite the UK government securing a deal with CF Industries to resume CO2 production for the next three weeks, GBP investors remained anxious as the crisis could worsen as we head towards winter. 

The flash PMIs this morning could influence Sterling, especially if they miss forecasts, but the big event today is the Bank of England (BoE) policy decision. With a lot of uncertainty around the UK economy, with the bank strike a cautious tone? 

Euro (EUR) Muted amid Uncertainty 

The Euro (EUR) was subdued through yesterday’s session as the looming Federal Reserve decision and German general election caused hesitancy among EUR investors. 

With Angela Merkel having been a source of certainty for 16 years, investors are understandably apprehensive about the upcoming election, which weighed on EUR sentiment. 

Turning to today, the flash PMIs for the Eurozone are out this morning. Any unexpected results could cause significant movement. 

US Dollar (USD) Quiet ahead of Fed Decision 

The US Dollar (USD) softened through yesterday’s session as USD investors awaited the Federal Reserve’s policy decision and a risk-on mood dampened USD demand. 

While the Fed left policy unchanged, it struck a fairly hawkish tone. The central bank expects to taper bond purchases ‘soon’ and half of policymakers foresee a rate hike next year. This initially boosted the US Dollar, but it lost some gains overnight. 

Looking ahead, the latest unemployment data for the US this afternoon could further boost USD, as initial jobless claims are forecast to fall. 

Canadian Dollar (CAD) Firms as Oil Prices Rise 

The commodity-linked Canadian Dollar (CAD) gained ground yesterday as oil prices rose steadily and a softer US Dollar gave CAD room to climb. 

CAD could face headwinds this afternoon as the latest Canadian retail sales figures are forecast to show a 1.2% contraction. 

Australian Dollar (AUD) Strengthens as PMIs Beat Forecasts 

The Australian Dollar (AUD) trended higher in overnight trade, as both its manufacturing and services PMIs beat expectations. 

New Zealand Dollar (NZD) Gains amid Risk-On Mood 

The New Zealand Dollar (NZD) also ticked higher overnight, as a slightly more upbeat market mood boosted demand for the risk-sensitive ‘Kiwi’.