US Dollar Ends Week on a Low amid Upbeat Market Mood

US Dollar (USD) Extends Downside amid Cheery Trade

The US Dollar (USD) continued its post-inflation fall on Friday as markets continued to pare back Federal Reserve interest rate rise bets. After US inflation cooled more than forecast, many Fed officials signalled a slower pace of policy tightening.

The subsequent risk-on rally sapped the safe-haven Dollar through to the end of the week. A larger-than-forecast drop in consumer sentiment added to USD’s downside.

Fed policy forecasts could continue driving USD today. If consumer inflation expectations decline, USD could face fresh selling pressure.

Pound (GBP) Falters as UK Economy Contracts

The Pound (GBP) struggled on Friday. New data showed that the UK economy shrank by 0.2% in the third quarter of 2022. Although this was smaller than the forecast contraction of 0.5%, the news still weighed on Sterling.

However, a risk-on market mood helped limit the Pound’s losses against its safer rivals.

While today’s data calendar is light for GBP, the week promises to be a busy one. The latest labour market report, inflation rate reading, and retail sales figures are all due out, along with the government’s long-awaited fiscal statement. We could witness a lot of volatility.

Euro (EUR) Mixed amid Risk-On Mood

The Euro (EUR) was mixed on Friday, ticking higher against some of its rivals thanks to its negative correlation with the weakening US Dollar.

However, an upbeat market mood saw the safer Euro slip against some of its riskier peers. Meanwhile, any upside coming from the prospects of more European Central Bank (ECB) interest rate rises was offset by recession fears.

This morning, the latest Eurozone industrial production figures are due out. Could a sharp slowdown in factory output hamper the single currency?

Canadian Dollar (CAD) Dragged Down by USD

The Canadian Dollar (CAD) declined on Friday, with an uptick in oil prices failing to lift the crude-linked ‘Loonie’. Instead, CAD traded in tandem with USD, due to the increasingly positive correlation between the two currencies.

With no market-moving Canadian data out today, USD movement and oil price dynamics may drive CAD.

Australian Dollar (AUD) Flat amid Lack of Data

The Australian Dollar (AUD) wavered in a narrow range overnight amid a lack of economic data and a tepid market mood.

New Zealand Dollar (NZD) Rangebound amid Muted Trade

Likewise, the New Zealand Dollar (NZD) moved sideways during the overnight session due to thin trading conditions.

Samuel Birnie

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