US Dollar Refreshes Multi-Year Highs despite Risk-On Mood

Pound (GBP) Stumbles as UK Insolvencies Hit Ten-Year High 

The Pound (GBP) initially rose yesterday, supported by an upbeat market mood. However, troubling UK economic news quickly saw GBP turn south.

The Insolvency Service released new data showing that company insolvencies hit a ten-year high in the first three months of this year. The report is the latest sign that surging inflation and energy costs, along with supply chain snarl-ups, are hitting UK firms. 

Sterling could be open to further losses today amid a lack of UK economic data. 

Euro (EUR) Ticks Higher as German Inflation Beats Forecasts 

The Euro (EUR) managed to firm against many of its peers during yesterday’s session as a positive European market mood lent support to the single currency. 

In addition, Germany’s flash inflation rate for April edged up from 7.3% to 7.4%, beating forecasts of a drop to 7.2%. 

Today we could see some big movement in EUR exchange rates. The Eurozone’s flash GDP growth rate for the first quarter of this year is out, alongside the bloc’s preliminary CPI. If Eurozone inflation exceeds forecasts again, the single currency could climb. 

US Dollar (USD) Remains Underpinned by Fed Rate Rise Bets 

The US Dollar (USD) dipped at the start of the European session yesterday as a bullish trading sentiment undermined the safe-haven currency. However, USD was then able to recover, trending up overall and hitting fresh multi-year highs against GBP and EUR. 

The upside came despite an unexpected contraction in the US economy. GDP growth printed at -1.4%, rather than the expected 1.1%. However, the decline was due to ‘technical factors’, according to some economists. Notably, US consumer spending and business investment were both up. A 50-bps rate rise from the Federal Reserve next Wednesday is still a near certainty, and this underpinned the US Dollar. 

Turning to today, the latest US core PCE price index – the Fed’s preferred measure of inflation – is in the spotlight for USD investors. Economists expect it to soften slightly. Would this be enough to prompt some USD selling? 

Canadian Dollar (CAD) Buoyed by Modest Rise in Crude 

The Canadian Dollar (CAD) moved higher against its weaker peers yesterday as a slight rise in oil prices boosted the commodity-linked currency. 

Today, Canadian GDP is in focus. Consensus estimates see the Canadian economy growing by 0.8% in February. If the data meets forecasts, CAD could climb. 

Australian Dollar (AUD) Firms as Risk Appetite Increases 

The risk-sensitive Australian Dollar (AUD) ticked higher overnight as a bullish market mood boosted demand for the ‘Aussie’. 

New Zealand Dollar (NZD) Undermined by Commodities Pullback 

The New Zealand Dollar (NZD) was unable to capitalise on the upbeat market sentiment overnight as softer commodities prices pressured the resources-linked ‘Kiwi’. 

Samuel Birnie

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