US Dollar (USD) Sheds Gains following Dovish Fed Comments
The safe-haven US Dollar (USD) initially softened yesterday amid a risk-on market mood, but mixed US reports in the afternoon provided USD investors with fresh impetus.
Chief among them was the JOLTs job openings survey, which showed that the US labour market remains historically tight. This boosted Federal Reserve interest rate rise bets, thereby lifting the ‘Greenback’. But a dovish speech from Fed Chair Jerome Powell in the evening saw USD slump back down.
Looking ahead, the latest core PCE price index and ISM manufacturing PMI could prompt a downside in USD today. The two reports are expected to show easing inflation and a contraction in American manufacturing activity, which may see the US Dollar fall even further.
Pound (GBP) Softens as UK Economic Worries Return
The Pound (GBP) fell against many of its peers yesterday as angst about the UK economy once again rocked the currency.
Food inflation hit a record high in the UK, exacerbating fears about the cost-of-living crisis, while surveys showed a drop in British business confidence. In addition, fears about the country’s financial stability crept back into markets amid rising government bond yields.
Turning to today, the UK’s final manufacturing PMI may only affect GBP if it surprises investors. Otherwise, Sterling could trade on domestic headlines.
Euro (EUR) Fluctuates Lower amid Easing Inflation
The Euro (EUR) was volatile yesterday, heading lower overall, after Eurozone inflation cooled more than expected. While easing inflation is positive for the bloc’s economy, it also means the European Central Bank (ECB) may not raise interest rates as high as expected, which makes EUR a less attractive investment.
In addition, the Euro’s negative correlation with the US Dollar created headwinds after the American currency staged a late-session recovery.
Aside from the final manufacturing PMI this morning, the Eurozone’s latest unemployment rate is the key piece of data today. If it holds at a record low, the single currency could catch some bids.
Canadian Dollar (CAD) Buoyed by Stronger Oil Prices
The Canadian Dollar (CAD) strengthened yesterday as a steady uptick in oil prices lifted the commodity-linked ‘Loonie’.
This afternoon, Canada’s manufacturing PMI is forecast to show a deepening contraction. This could weigh on CAD exchange rates.
Australian Dollar (AUD) Rises amid Risk-On Mood
An upbeat market mood boosted the risk-sensitive Australian Dollar (AUD) overnight, as the prospect of slower Fed rate rises and better-than-forecast Chinese data cheered investors.
New Zealand Dollar (NZD) Firms as Market Sentiment Improves
Likewise, the riskier New Zealand Dollar (NZD) gained ground in overnight trade as investors flocked to the ‘Kiwi’ amid the upbeat market mood.