US Dollar (USD) Stumbles as Fed Could Rethink Rate Hike
The US Dollar (USD) fluctuated lower yesterday as markets continued to scale back Federal Reserve rate rise bets following the collapse of Silicon Valley Bank.
SVB’s failure was linked to the rapid rise in US interest rates over the past 12 months, so signs of financial stress may make the Fed think twice before cranking up borrowing costs again next week.
Attention now turns to the latest US inflation rate reading. Headline and core inflation are expected to ease, which may further dent Fed bets. However, the US CPI exceeded forecasts last month. Could another hot reading see USD recover?
Pound (GBP) Mixed as Markets Assess UK Financial Risks
The Pound (GBP) was mixed yesterday as a risk-on tone in the currency markets saw Sterling slip against its riskier peers and rise against the safer ones.
Worries about the stability of the UK financial system may have troubled GBP investors. However, HSBC’s purchase of Silicon Valley Bank (SVB) UK eased these fears somewhat.
The Pound has run out of steam this morning following the release of a mixed UK jobs report. While unemployment held at 3.7%, wage growth printed slightly below forecast.
Euro (EUR) Muted ahead of ECB Decision
The Euro (EUR) failed to find a clear direction yesterday, despite the currency’s negative correlation with the weakening US Dollar (USD), due to the upbeat mood in markets.
Also subduing the common currency, investors seemed hesitant ahead of the European Central Bank (ECB) interest rate decision later this week.
Eurozone data remains thin on the ground today, so EUR may continue to struggle for a clear direction.
Canadian Dollar (CAD) Slides as Oil Prices Decline
The Canadian Dollar (CAD) lost ground yesterday as the crude-linked ‘Loonie’ was dragged lower by a drop in oil prices.
With no Canadian Data due out today, oil price dynamics could continue to drive CAD exchange rates.
Australian Dollar (AUD) Fluctuates in Mixed Trade
The Australian Dollar (AUD) initially stumbled overnight on Monday, with the currency paring some of its earlier gains amid a fall in domestic business confidence.
However the ‘Aussie’ rebounded again toward the end of the Asian trading session amid an uptick in commodity prices.
New Zealand Dollar (NZD) Buoyed by Upbeat Mood
The New Zealand Dollar (NZD) trended broadly higher in overnight trade. The risk-sensitive currency being buoyed by a prevailing risk-on mood.