US Dollar Softens as Fed Signals Policy Pause

US Dollar (USD) Declines following Fed’s Dovish Hike

The US Dollar (USD) weakened through yesterday’s European trade as a risk-on market mood and hesitancy ahead of the Federal Reserve decision saw investors shun the safe-haven currency.

The Fed meeting unfolded as expected. The bank raised rates by 25bps but signalled that this could be the final increase in its current hiking cycle. USD moved lower against many of its peers.

Today, the ‘Greenback’ may be licking its wounds following the dovish Fed decision. Later on, an expected rise in US jobless claims could further dent the US Dollar.

Pound (GBP) Rises despite Lack of Data

The Pound (GBP) climbed against many of its peers yesterday, although there was no clear catalyst for the movement.

Sterling may have been underpinned by ongoing bets on another Bank of England (BoE) interest rate rise, as well as a risk-on market mood.

Turning to today’s trade, the UK’s final services PMI is due out this morning. If it confirms an impressive expansion in the UK’s vital services sector, Sterling could rise even higher.

Euro (EUR) Supported by Record-Low Unemployment

The Euro (EUR) ticked higher against many of its peers yesterday after the Eurozone’s unemployment rate unexpectedly dropped to a new record low.

However, the single currency found its gains limited as markets were somewhat muted in the run-up to the European Central Bank (ECB) and Federal reserve interest rate decisions.

Today, all eyes are on the ECB. If the bank surprises markets with a larger 50bps hike, the Euro could soar. If it instead opts for a quarter-point hike, investors will focus on the bank’s forward guidance, with hints of more rate rises likely to support EUR.

Canadian Dollar (CAD) Pressured by Weaker Oil Prices

The Canadian Dollar (CAD) was subdued yesterday as softening oil prices sapped the commodity-linked currency’s appeal. Worries about dwindling demand have pressured crude prices in recent days amid a gloomy economic outlook.

Oil price dynamics could continue to drive CAD exchange rates today. Will a rebound in prices pull the ‘Loonie’ higher?

Australian Dollar (AUD) Rebounds on Upbeat Trade Data

The Australian Dollar (AUD) witnessed some volatility overnight, initially dropping as the session began before recouping its losses. Positive Australian trade data helped boost the ‘Aussie’.

New Zealand Dollar (NZD) Recovers as Risk Appetite Improves

The New Zealand Dollar (NZD) faced similar movements to the ‘Aussie’ last night, with the risk-sensitive ‘Kiwi’ recovering from an initial drop thanks to an upbeat market mood.

Samuel Birnie

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