US Dollar Reverses Losses following Hawkish FOMC Minutes

Pound (GBP) Slips as NHS Covid Pressures Mount 

The Pound (GBP) fell against many of its rivals yesterday as surging Omicron cases piled pressure on the NHS due to Covid-related staff absences. 

This was partially offset, however, by Tuesday’s announcement that Boris Johnson was not considering new Covid restrictions. Sterling was therefore able to post small gains against some of its weaker peers. 

The UK’s final services PMI for December this morning will likely trigger some movement in the Pound, particularly if it differs to the flash estimate. 

Euro (EUR) Muted as Eurozone Growth Slows 

The Euro (EUR) was mixed in yesterday’s trade, slipping against its stronger counterparts following a poor composite PMI. Economic activity in the Eurozone fell to a nine-month low in December as rising Covid cases and new restrictions dented service-sector activity. 

However, the single currency’s negative correlation to a weaker US Dollar (USD) helped to limit EUR’s losses. 

In today’s session, better-than-expected German factory orders and a risk-off mood could support the safe-haven Euro, while a stronger US Dollar may cap the upside. 

US Dollar (USD) Dented by Upbeat Market Mood 

The US Dollar stumbled through yesterday’s session as a bullish market sentiment sapped the appeal of the safe-haven currency. 

Markets largely ignored the stellar ADP employment change report from the US, which doubled economists’ expectations, as investors awaited the latest meeting minutes from the Federal Open Market Committee (FOMC). 

The meeting minutes revealed that the Federal Reserve may hike rates ‘sooner or at a faster pace than participants had earlier anticipated’. Following this, USD regained most of its losses. 

Turning to today, US factory orders, initial jobless claims and last night’s hawkish Fed minutes could boost the ‘Greenback’. 

Canadian Dollar (CAD) Ticks Lower despite Oil Prices Rising 

The commodity-linked Canadian Dollar (CAD) softened during yesterday’s session, despite rising oil prices, as OPEC+ went ahead with planned oil output increases

Canada’s balance of trade figures could influence CAD exchange rates today, as could movements in the oil market. 

Australian Dollar (AUD) Tumbles following Hawkish Fed 

The Australian Dollar (AUD) fell sharply overnight as the hawkish Fed minutes spooked markets, with less favourable trading conditions seemingly on the way. 

New Zealand Dollar (NZD) Slumps as Market Sentiment Sours 

The New Zealand Dollar (NZD) also dropped in overnight trade, as the bearish market mood saw diminished demand for the risk-sensitive ‘Kiwi’. 

Samuel Birnie

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