US Dollar (USD) Claws Back Losses on Hawkish Pause
The US Dollar (USD) initially slumped yesterday, hitting a one-year low against the Pound (GBP), as expectations of a Federal Reserve policy pause deterred would-be USD investors.
In the evening, the ‘Greenback’ regained some ground. While the Fed did leave rates unchanged, it signalled that it was not done with policy tightening. The bank even upwardly revised its terminal rate projection to 5.6%, up from 5.1% in March.
Turning to today, US retail sales could dent the US Dollar as economists expect a contraction in domestic sales last month.
Pound (GBP) Climbs as UK Economy Expands
A recovery in the UK economy boosted the Pound yesterday. UK GDP expanded 0.2% in April, rebounding from March’s 0.3% contraction.
This upbeat data added to expectations of more policy tightening from the Bank of England (BoE), adding to Sterling’s gains.
Today, UK data is in short supply so Sterling movement may be limited. BoE rate hike bets could underpin the Pound.
Euro (EUR) Buoyed by Industrial Data
The Euro (EUR) enjoyed some success yesterday, with better-than-forecast Eurozone industrial production providing EUR with a boost.
However, the safer single currency weakened against its riskier rivals due to a risk-on market mood.
The Euro may trade narrowly ahead of the ECB meeting this afternoon, which could then spark volatility. Any signals of a coming policy pause in the bank’s accompanying statement, or the subsequent press conference, could hammer EUR. Conversely, hawkish hints would likely lift the currency.
Canadian Dollar (CAD) Falls Alongside USD
The Canadian Dollar (CAD) softened yesterday, with the ‘Loonie’ suffering from its positive correlation with a weakening US Dollar.
Market-moving Canadian data remains thin on the ground this session. As a result, oil price movement could drive CAD today.
Australian Dollar (AUD) Firms following Strong Jobs Data
The Australian Dollar (AUD) climbed overnight after stronger-than-expected employment data. Australia’s jobless rate unexpectedly dropped, indicating a robust labour market.
New Zealand Dollar (NZD) Weakens as GDP Confirms Recession
The New Zealand Dollar (NZD) zigzagged lower last night after New Zealand’s latest GDP data confirmed that the country was in a recession during the fourth quarter of 2022 and the first quarter of 2023.