US Dollar Nosedives as American Inflation Cools

US Dollar (USD) Plunges amid Inflation Cooldown

The US Dollar (USD) plummeted yesterday after US price pressures cooled more than expected. Both headline and core inflation printing below forecasts.

Signs that inflation may have peaked have led markets to massively scale back their expectations for further Federal Reserve interest rate rises. As a result, the US Dollar dove to multi-month lows.

Looking ahead, softer consumer sentiment figures this afternoon may dent USD.

Pound (GBP) Firms on Northern Ireland Optimism

The Pound (GBP) strengthened yesterday as UK Prime Minister Rishi Sunak met with Taoiseach Micheál Martin at the British-Irish Council summit. This raised hopes that the dispute over the Northern Ireland Protocol could be resolved, alleviating fears of a UK-EU trade war.

Cooling US inflation triggered a rally in the afternoon, boosting the increasingly risk-sensitive Pound and easing UK financial fears as government borrowing costs fell.

This morning, UK GDP data confirmed that the UK economy shrank in the third quarter. However, the contraction was not as deep as feared. Therefore, any downside in Sterling may be limited.

Euro (EUR) Slips following ECB Economic Bulletin

The Euro (EUR) initially fell yesterday after the European Central Bank (ECB) warned of significant downside risks to the Eurozone economy in its latest Economic Bulletin.

However, EUR was able to recoup losses against some of its peers later on thanks to its negative correlation with the US Dollar, which slumped in the afternoon.

Looking ahead, speeches from two ECB officials could affect the single currency. First up is ECB Vice-President Luis de Guindos, who has made hawkish remarks in recent days. Could his comments give EUR a boost?

Canadian Dollar (CAD) Falls in Tandem with USD

The Canadian Dollar (CAD) tumbled yesterday afternoon as the ‘Loonie’ was dragged down by its positive correlation with the US Dollar.

Turning to today, commodity prices could affect the resource-linked currency. In particular, oil prices may impact CAD exchange rates.

Australian Dollar (AUD) Rises amid Risk-On Mood

The Australian Dollar (AUD) strengthened overnight as the risk-sensitive ‘Aussie’ enjoyed the upbeat global market mood following yesterday’s softer US inflation figures.

New Zealand Dollar (NZD) Firms as Markets Rally

Likewise, the New Zealand Dollar (NZD) firmed amid the risk-on mood. However, New Zealand’s business PMI revealed an unexpected contraction, capping gains for the ‘Kiwi’.

Samuel Birnie

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