US Dollar (USD) Slides as Fed Prepares to Slow Rate Hikes
After initially strengthening, the US Dollar (USD) slumped during Friday’s session as markets began to trim Federal Reserve interest rate hike bets.
First reported by the Wall Street Journal, speculation that the Fed will start to slow its pace of monetary policy tightening triggered a sharp sell-off in USD.
The US PMIs won’t be released until this afternoon, so until then risk appetite could drive the safe-haven ‘Greenback’.
Pound (GBP) Falls following Downbeat Data
The Pound (GBP) initially dropped during Friday’s session following some dismal data. UK retail sales slumped by 1.4% and public sector borrowing exceeded forecasts. In addition, the political uncertainty as the Tory Party prepares to elect its third Prime Minister this year added to GBP’s woes.
However, the increasingly risk-sensitive UK currency managed to rebound against some of its safer peers amid a revival of risk appetite in the afternoon.
Today could bring more volatility. The morning kicks off with the PMI surveys, with an expected contraction in UK services potentially weighing on the Pound. Later, the qualifying candidates in the Tory leadership contest will be announced.
Euro (EUR) Falters despite Tailwinds
The Euro (EUR) traded in mixed range on Friday, initially firming against some of its weaker peers before slipping in the afternoon amid the ongoing escalation of the Ukraine crisis.
The downside came despite Eurozone consumer confidence unexpectedly improving in October and the drop in the US Dollar, with which EUR is negatively correlated.
Turning to today’s session, the latest Eurozone PMIs revealed a deepening contraction in private sector activity. This could create headwinds for the single currency.
Canadian Dollar (CAD) Rises as Retail Sales Recover
The Canadian Dollar (CAD) firmed on Friday after Canadian retail sales data printed higher than forecast.
Looking ahead, the preliminary estimates for manufacturing sales may impact CAD today. Otherwise, oil prices could influence the commodity-linked currency.
Australian Dollar (AUD) Drops on Poor PMIs and RBA Comments
The Australian Dollar (AUD) slumped overnight. Worse-than-forecast PMI data dented the ‘Aussie’, as did cautious comments from the Reserve Bank of Australia’s (RBA) Christopher Kent.
New Zealand Dollar (NZD) Falls as Markets Turn Bearish
The risk-sensitive New Zealand Dollar (NZD) also dropped in overnight trade, with the ‘Kiwi’ dragged down by its correlation to the ‘Aussie’ and a souring market mood.