US Dollar Surges as Fed Ready to Raise Rates

Pound (GBP) Mixed as Factory Orders Surge 

The Pound (GBP) limited its losses during Wednesday’s session after the Confederation of British Industry (CBI) industrial trends orders index jumped to a record high, revealing factory orders growth hit its highest level since the survey began in 1977. 

Meanwhile, Sterling faced Brexit headwinds as European Commission vice-president Maroš Šefčovič said that Northern Ireland protocol talks will ‘probably’ run into next year. 

CBI survey data on the health of the UK retail sector may drive modest movement in the Pound today, with further evidence of growth combined with rising inflation and staff shortages potentially adding pressure on the Bank of England (BoE) to raise interest rates. 

Euro (EUR) Dips as German Business Morale Drops 

The Euro (EUR) weakened yesterday after the German Ifo business climate indicator for November fell for a fifth consecutive month, indicating business morale in the Eurozone’s powerhouse economy is at a seven-month low. 

The strong US Dollar also dented the single currency due to the negative correlation in the pairing, offsetting any support from a coalition agreeing to form a German government with Olaf Scholz as chancellor. 

Looking ahead, European countries announcing new measures to combat the surge of Covid-19 infections sweeping Europe will continue driving the Euro’s movement, as cases numbers break records in some countries. 

US Dollar (USD) Boosted by Fed Policy Tightening Signals 

The US Dollar (USD) made significant gains on Wednesday after the Federal Open Market Committee (FOMC) meeting minutes revealed the Federal Reserve is ready to raise interest rates if inflation continues to soar, and accelerate tapering. 

High-impact US data releases also boosted the US Dollar. The Fed’s preferred measure of inflation, the PCE core price index, met expectations by rising to 4.1% in October, up from 3.7% in September, fuelling Fed rate hike bets. 

Initial jobless claims for last week surprised by plummeting to the lowest level since 1969 at 199,000, potentially providing evidence for the Federal Reserve to raise interest rates due to the strength of the US jobs market. 

With the Thanksgiving holiday today, trade in the US Dollar will likely remain thin going into the weekend. 

Canadian Dollar (CAD) Firm as Oil Prices Hold 

The oil-sensitive Canadian Dollar (CAD) ticked higher through Wednesday’s session as WTI crude held above $78 a barrel after Tuesday’s oil price rally.  

After the US and other major energy consuming countries announcement to release crude reserves, reports emerged yesterday that OPEC+ are rethinking production levels, bolstering oil prices. 

Australian Dollar (AUD) Dented by USD Strength 

After falling through yesterday’s as the US Dollar soared, the Australian Dollar (AUD) attempted to recover some of its losses overnight after an improvement in market mood. 

New Zealand Dollar (NZD) Plummets on RBNZ Rate Decision Disappointment 

The New Zealand Dollar (NZD) continued to plunge through Wednesday as the NZD selloff continued due to the Reserve Bank of New Zealand’s rate hike, and forecasts proving to be less aggressive than anticipated.  

New Zealand trade data released overnight also weighed on the ‘Kiwi’ as the country’s trade deficit widened to a fresh all-time high. 

Andrew Roberts

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