US Dollar (USD) Surges on Hawkish Fed Expectations
Speculation that the Federal Reserve will continue raising interest rates lifted the US Dollar (USD) yesterday, with the US Dollar index hitting a two-month high.
Multiple Fed rate setters signalled that future rate rises may be necessary, while jobless claims declined more than forecast. US Treasury yields, which often indicate Fed bets, surged to their highest levels since they slumped in March.
The American currency trimmed these gains overnight amid renewed fears of a US debt default. More Fed speeches later today could drive movement in USD exchange rates. Could hawkish signals see the ‘Greenback’ rally again?
Pound (GBP) Softens in Absence of Data
The Pound (GBP) saw mixed movement yesterday, weakening against its stronger peers, as a lack of UK economic data left Sterling rudderless.
Comments from Bank of England (BoE) officials may have lent Sterling limited support, cushioning its losses. BoE Governor Andrew Bailey once again cited concerns about the ‘second-round effects’ of inflation, boosting bets on more interest rate hikes.
UK economic data is in short supply again today so we may see limited movement in the Pound.
Euro (EUR) Muted due to EU Public Holiday
The Euro (EUR) was also subdued during yesterday’s session amid thin trading conditions due to the Ascension Day public holiday.
Dovish comments from European Central Bank (ECB) Vice-President Luis de Guindos may have dented EUR. De Guindos suggested that the bank was close to ending its tightening cycle.
Looking ahead, two ECB policymakers are due to speak. Isabel Schnabel, one of the most hawkish ECB rate setters, could boost the Euro if she advocates more rate rises. ECB President Christine Lagarde could also impact EUR in the evening.
Canadian Dollar (CAD) Hits Monthly Highs on USD Strength
The Canadian Dollar (CAD) rallied yesterday, hitting monthly highs against may of its peers, as CAD was pulled higher by its positive correlation with USD.
Turning to today, CAD could face headwinds as new data is forecast to show that Canadian retail sales slumped in March.
Australian Dollar (AUD) Rises as USD Loses Ground
The Australian Dollar (AUD) firmed in overnight trade, with the ‘Aussie’ enjoying its negative correlation to the US Dollar, which dropped.
New Zealand Dollar (NZD) Climbs following Strong Trade Data
The New Zealand Dollar (NZD) rallied last night as stronger-than-expected trade data lifted the ‘Kiwi’.