US Dollar in Freefall as Fed Rate Hike Undermined by Cautious Messaging

Pound (GBP) Wavers as Strike Concerns Offset BoE Rate Hike Bets

The Pound (GBP) traded without a clear direction bias yesterday.

Sterling sentiment continued to be buoyed by bets that the Bank of England (BoE) will raise interest rates by 50bps at its August policy meeting.

However the Pound’s upside potential remained limited in the face of fresh concerns over the UK’s ‘summer of discontent’.

Looking ahead, GBP exchange rates may remain adrift today amid ongoing UK political uncertainty.

Euro (EUR) Flat amid European Gas Fears

The Euro (EUR) was trapped in a narrow range on Wednesday, amid ongoing concerns over European energy security.

This came as Russian’s Gazprom reduced gas flows through the Nord Stream pipeline to just 20% of total capacity, stoking concerns that Europe will face a gas shortage this winter.

The publication of Germany’s consumer price index will be in the spotlight today. Will another drop in Germany inflation act as a headwind for the Euro this afternoon?

US Dollar (USD) Sinks Following Fed Hike

The US Dollar (USD) initially weakened yesterday as a cautiously optimistic market mood sapped demand for the safe-haven currency.

This downtrend persisted despite the latest US durable goods orders printing well above forecast in June.

The US Dollar then collapsed in the wake of the latest Federal Reserve rate decision. While it raised rates by another 75bps, the Fed’s cautious economic outlook prompted USD investors to rein in bets for future hikes.

Turning to today, the focus is likely to be on the latest US GDP figures. The preliminary figures for the second quarter are forecast to report a rebound in economic growth, potentially lifting the US Dollar this afternoon.

Canadian Dollar (CAD) Muted despite Rising Oil Prices

The Canadian Dollar (CAD) ticked lower on Wednesday, with the commodity-linked ‘Loonie’ struggling to attract support in spite of another uptick in oil prices.

Australian Dollar (AUD) Dented by Underwhelming Retail Sales Figures

The Australian Dollar (AUD) ticked lower overnight on Wednesday, in response to a weaker-than-expected domestic retail sales print. Although these losses were tempered later in the session amid a prevailing risk-on mood.

New Zealand Dollar (NZD) Buoyed in Bullish Trade

The New Zealand Dollar (NZD) initially stumbled during today’s Asian trading session, before swiftly rebounding as an upbeat mood bolstered the appeal of the risk-sensitive ‘Kiwi’.

Matthew Andrews

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