US Dollar Hits Fresh 20-Year High on Hawkish Fed Hike

US Dollar (USD) Climbs as Russia Fears Hit Markets

The safe-haven US Dollar (USD) ticked higher yesterday as fears about an intensification in the Russia-Ukraine war rattled global markets.

The ‘Greenback’ strengthened further in the evening as the Federal Reserve delivered a hawkish rate hike. The Fed raised rates by 75 bps for the third consecutive time, while signalling that more aggressive hikes are on the way. Following the decision, the US Dollar Index hit a fresh two-decade high.

Looking ahead, last night’s Fed decision and the subsequent risk aversion in markets could continue to keep USD afloat today.

Pound (GBP) Stumbles as Government Borrowing Costs Soar

The Pound (GBP) slipped against the majority of its peers yesterday after UK government borrowing came in higher than expected in August.

Public sector borrowing printed at £11.8bn last month, far higher than the expected £8.45bn, as rising inflation pushes debt interest repayments to eye-watering levels. This, in turn, raised significant concerns about the state of the UK public finances.

Turning to today, the Bank of England (BoE) interest rate decision is in the spotlight. Markets expect a rate rise of at least 50 basis points, with a 75-bp hike looking fairly likely. A steeper rise could boost Sterling.

Euro (EUR) Drops as Putin Partially Mobilises Russian Military

The Euro (EUR) slumped yesterday after Vladimir Putin announced a partial military mobilisation and threatened the use of nuclear weapons, raising fears that the conflict in Ukraine could escalate.

Moscow is seemingly doubling down on its failing invasion by committing more troops and weaponry. Analysts fear that this will mean more destruction and bloodshed, as well as more damage to the Eurozone economy.

This morning, the European Central Bank’s (ECB) latest economic bulletin could impact the single currency. However, EUR investors may be more focused on news from Ukraine.

Canadian Dollar (CAD) Mixed as Oil Prices Fluctuate

The Canadian Dollar (CAD) rose and fell yesterday, with volatility in the oil market impacting the crude-linked currency.

With no notable Canadian data due out today, CAD could once again trade in tandem with oil prices.

Australian Dollar (AUD) Down amid Risk Aversion

The Australian Dollar (AUD) stumbled in overnight trade as the Fed’s hawkish rate hike rattled global markets, thereby sapping the appeal of the risk-sensitive ‘Aussie’.

New Zealand Dollar (NZD) Slips as Trade Deficit Widens

The New Zealand Dollar (NZD) also declined overnight amid the risk-off market mood and a larger-than-expected New Zealand trade deficit in August.

Samuel Birnie

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