US Dollar Nosedives following Dire PMIs and Fed Meeting Minutes

US Dollar (USD) Tanks as Markets Readjust Interest Rate Expectations

The US Dollar (USD) plummeted yesterday, declining by over 1% against many of its peers, after dismal US PMI results saw markets scale back Federal Reserve rate hike bets.

The Federal Open Market Committee (FOMC) meeting minutes in the evening added to USD’s downside. The minutes showed that a ‘substantial majority’ of Fed officials are in favour of slowing the pace of rate rises.

US markets are closed today for Thanksgiving, so USD movement may be somewhat subdued. Amid a lack of economic data, risk appetite could drive the safe-haven currency.

Pound (GBP) Soars despite Economic Worries

The Pound (GBP) surged higher yesterday as better-than-forecast UK PMI surveys gave Sterling a lift. Although private sector activity remains in contraction, the overall PMI score improved for the first time since June.

In addition, the supreme court ruled that the Scottish parliament cannot hold a second independence referendum without Westminster’s approval. With the immediate threat of an independence vote gone, GBP rallied.

Turning to today, a number of Bank of England (BoE) policymakers are due to speak. If they signal a slower pace of monetary tightening as the UK slips into recession, GBP could trim its gains.

Euro (EUR) Rocked by Risk-On Mood

The Euro (EUR) was mixed yesterday, initially fluctuating amid Russia-Ukraine fears and stronger-than-expected PMI results.

In the afternoon, a surge in risk appetite saw the safe-haven Euro slump against its riskier peers. However, the single currency made gains against its North American counterparts.

Looking ahead, the European Central Bank’s (ECB) meeting minutes are in focus. The bank has front-loaded interest rate rises in an attempt to rein in runaway inflation. EUR could drop if the ECB minutes suggest that the bank will be less aggressive at future meetings.

Canadian Dollar (CAD) Tumbles amid Sliding Oil Prices

The Canadian Dollar (CAD) slumped through yesterday’s session as a sharp fall in oil prices weighed on the commodity-linked ‘Loonie’.

This afternoon, Canada’s average weekly earnings could impact CAD. Any signs that wage inflation is easing may see the Canadian Dollar soften.

Australian Dollar (AUD) Capped by China Covid Worries

The risk-sensitive Australian Dollar (AUD) edged higher overnight as expectations of a less aggressive Federal Reserve cheered markets. However, concerns about surging Covid cases in China severely limited the upside.

New Zealand Dollar (NZD) Eases Off Recent Highs

The New Zealand Dollar (NZD) retreated in overnight trade, despite an upbeat market mood, as NZD investors took a breather following the ‘Kiwi’ Dollar’s recent winning streak.

Samuel Birnie

Contact Samuel Birnie


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