US Dollar (USD) Firms ahead of Fed Decision
The US Dollar (USD) strengthened yesterday, regaining some of last week’s losses, as USD bets picked up ahead of the Federal Reserve interest rate decision on Wednesday evening.
Markets expect the US central bank to raise rates by another 75bps to 4%, with the prospect of a higher return on investment boosting USD’s appeal.
Today, the US JOLTs job openings and ISM manufacturing PMI could impact the ‘Greenback’. Any signs that the US economy is slowing could dent the Dollar, while strong results could further boost rate rise bets.
Pound (GBP) Dented by Lending Data
The Pound (GBP) slumped yesterday as last week’s tailwinds failed to carry though into this week’s trade.
Instead, GBP investors may have grown concerned over declining mortgage approvals and credit card borrowing. With interest rates rising and the income squeeze tightening, the UK economy is showing further signs of slowing down.
The final manufacturing PMI could impact GBP later this morning, if it differs from flash estimates. Otherwise, domestic political headlines could affect Sterling.
Euro (EUR) Slips despite Hot CPI
The Euro (EUR) weakened yesterday, despite Eurozone inflation exceeding forecasts to hit a fresh record high of 10.7%.
While the hot CPI reading puts more pressure on the European Central Bank (ECB) to raise interest rates, this failed to lift the single currency. Instead, EUR investors seemed worried about the twin risks of surging inflation and contracting economic activity.
Eurozone data is thin on the ground today. As a result, EUR could be vulnerable to losses.
Canadian Dollar (CAD) Rises in Tandem with USD
The Canadian Dollar (CAD) found success against its weaker peers yesterday as the currency seemed to enjoy renewed interest in North American currencies.
Looking ahead, Canada’s latest manufacturing PMI is due out this afternoon. Could a worsening contraction in factory activity weigh on the ‘Loonie’?
Australian Dollar (AUD) Fluctuates amid RBA Hike and China Data
The Australian Dollar (AUD) was volatile overnight. The Reserve Bank of Australia (RBA) raised interest rates by 25bps, with the relatively small rise denting the ‘Aussie’. However, China’s better-than-forecast manufacturing PMI supported AUD, due to the Australian Dollar’s status as a proxy for the Chinese economy.
New Zealand Dollar (NZD) Gains amid Risk-On Rally
The New Zealand Dollar (NZD) strengthened overnight as a rally in Asian markets drove increased demand for the risk-sensitive ‘Kiwi’.