US Dollar Climbs as Debt Ceiling Deadline Inches Closer

US Dollar (USD) Strengthens as Debt Ceiling Deadline Creeps Closer

The US Dollar (USD) continued its upward march yesterday, as the US debt ceiling deadline crept closer.

Fears of the global economic fallout of a debt default soured the market mood and brought safe-haven flows to the ‘Greenback’. Furthermore, positive US economic data may have brought additional tailwinds.

The Federal Reserve’s preferred gauge of inflation, the core PCE price index, is due to print this afternoon. If this holds as forecast, USD could climb higher as investors bet on further Fed policy tightening.

Pound (GBP) Buoyed by Elevated Rate Hike Bets

Yesterday, the Pound (GBP) was kept afloat by bets on further interest rate hikes from the Bank of England (BoE).

After Wednesday’s shock inflation data, markets starting pricing more hikes beyond the expected 25bps rise in June. This underpinned Sterling amidst a lack of impact economic data and risk-off mood.

This morning, April’s retail sales data exceeded forecasts to reveal a 0.5% recovery following March’s revised slump of 1.2%. Will this be enough to lift the Pound during today’s session?

Euro (EUR) Struggles as Germany Enters Technical Recession

The Euro (EUR) struggled for support yesterday, following news that Germany entered a technical recession last winter.

The final GDP print was revised to show a 0.3% contraction in the first quarter of 2023, and thus the second consecutive quarter of negative growth. Because of this, EUR investors grew concerned over the health of the bloc’s largest economy.

Turning to today, European Central Bank (ECB) Chief Economist Philip Lane is due to speak. If he echoes his colleagues’ recent comments that the bank will press ahead with rate hikes, EUR could firm.

Canadian Dollar (CAD) Mixed as Oil Prices Plunge

The oil-linked Canadian Dollar (CAD) endured mixed trade yesterday. While plunging oil prices weighed on the ‘Loonie’, its close correlation to the US Dollar may have brought some tailwinds.

With a lack of data releases on the cards, CAD may see support if USD climbs. Elsewhere, if oil prices recover CAD could climb.

Australian Dollar (AUD) Edges Up on Debt Ceiling Hopes

The risk-sensitive Australian Dollar (AUD) traded with modest gains overnight, despite stalling Australian retail sales, as signs of a breakthrough in the US debt ceiling negotiations lifted the market mood.

New Zealand Dollar (NZD) Capped by Data Miss

The New Zealand Dollar (NZD) was rangebound during last night’s trading session after an unexpected decline in New Zealand consumer confidence kept a firm lid on the ‘Kiwi’.

Samuel Birnie

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