US Dollar (USD) Recoups Losses amid Risk Aversion
The safe-haven US Dollar (USD) weakened at the start of yesterday’s session, despite a risk-off market mood. Traders continued to rein in expectations for further Federal Reserve rate rises, as seen in declining US Treasury yields.
Eventually risk aversion saw USD rebound. China witnessed huge anti-lockdown protests, which continued into the night. Investors were worried that the disruption in the world’s second-largest economy would ripple out into global markets.
Turning to today, US consumer confidence is in focus. The US Dollar could stumble as economists expect consumer morale to have declined again this month.
Pound (GBP) Undermined by Poor Sales Data
The Pound (GBP) initially firmed on Monday morning but relinquished its gains as the day went on.
GBP investors may have been put off by the larger-than-forecast fall in the Confederation of British Industry’s (CBI) distributive trades survey, which indicated a sharp decline in retail sales.
Turning to today, the latest mortgage data and consumer credit figures could impact Sterling. If the housing market has continued to slow and households are borrowing money to pay for essentials, the Pound could slip.
Euro (EUR) Spikes and Slumps amid USD Movement
The Euro (EUR) spiked yesterday morning as the single currency benefitted from its strong negative correlation with the US Dollar, which witnessed significant selling activity. However, EUR fell in the afternoon as USD rebounded.
In addition, European Central Bank (ECB) President Christine Lagarde said the size of future interest rate rises would be data dependent. With Eurozone inflation forecast to fall and policymakers worried about a recession, markets started trimming rate hike expectations.
An expected improvement in Eurozone economic sentiment later this morning could boost EUR. The focus, however, may be Germany’s flash inflation rate this afternoon, as it could give an indication of the Eurozone reading tomorrow.
Canadian Dollar (CAD) See-Saws in Tandem with Oil
The crude-sensitive Canadian Dollar (CAD) dropped sharply early in this week’s trade as worries about the China protests dented oil demand. However, crude prices recovered in the afternoon, lifting the ‘Loonie’.
Canadian GDP is in the spotlight for CAD traders today. Could a third-quarter slowdown and a contraction in October hurt the Canadian Dollar?
Australian Dollar (AUD) Soars as Risk Appetite Returns
The Australian Dollar (AUD) surged higher overnight, regaining the previous day’s losses, amid a strong return of risk appetite. News of fresh economic stimulus measures in China, along with rumours that Beijing may scale back lockdown measures, saw markets rally.
New Zealand Dollar (NZD) Boosted by Upbeat Mood
The New Zealand Dollar (NZD) also jumped in overnight trade, as the bullish market mood boosted the risk-sensitive ‘Kiwi’.