US Dollar (USD) Extends Downside amid Risk-On Trade
An improving market mood weighed on the safe-haven US Dollar (USD) yesterday.
In addition, declining US Treasury bond yields and expectations that the Federal Reserve may opt for smaller interest rate rises moving forward added to USD’s downside.
Investors will now turn their attention to Fed Chair Jerome Powell’s speech this afternoon. Powell may want to signal to markets that the US central bank is still committed to bringing down inflation, but will his comments be enough to boost the ‘Greenback’?
Pound (GBP) Subdued in Absence of Data
The Pound (GBP) struggled for a clear direction yesterday amid a lack of notable UK data. However, Sterling did manage to eke out some gains against its weaker peers.
The modest upside may have come amid expectations that the Bank of England (BoE) will enact another interest rate rise at its next meeting. A preview of a speech from BoE Chief Economist Huw Pill showed that he would warn of persistently high inflation.
With UK data still in short supply today, GBP investors may turn to headlines about the British economy. Industry figures are expressing concern this morning about the scaling back of the government’s energy support for businesses, which could weigh on Sterling.
Euro (EUR) Firms as Unemployment Holds at Record Low
The Euro (EUR) strengthened yesterday, with the single currency enjoying the Eurozone’s latest unemployment rate reading.
The bloc’s jobless rate held at a record low of 6.5% in November, revealing ongoing resilience in the Eurozone labour market despite other economic pressures.
Turning to today’s session, a lack of Eurozone data may mean that news from the Russia-Ukraine conflict impacts EUR exchange rates. Any negative headlines will likely weigh on the Euro.
Canadian Dollar (CAD) Fails to Hold Oil-Inspired Gains
After enjoying an initial upside amid rising oil prices, the crude-linked Canadian Dollar (CAD) faced selling pressure yesterday afternoon. WTI crude trimmed its gains, pulling the ‘Loonie’ lower, while CAD’s positive correlation with USD also hurt the currency.
Amid a continued lack of Canadian economic data, oil price dynamics and USD movement may continue driving the Canadian Dollar today.
Australian Dollar (AUD) Softens as Sentiment Sours
The Australian Dollar (AUD) edged lower overnight as a souring market mood dampened demand for the riskier ‘Aussie’.
New Zealand Dollar (NZD) Resists Risk-Off Losses
Meanwhile, the New Zealand Dollar (NZD) managed to avoid steeper losses despite the downbeat turn in markets.