The US dollar traded in a wide range yesterday, initially stumbling amid Omicron fears, before rallying sharply after Federal Reserve Chair Jerome Powell’s tapering comments.
After relinquishing some of these gains overnight, Sterling appears to be trying to strengthen again this morning, with GBP/EUR buoyed at €1.1808 and GBP/USD climbing to $1.3713. GBP/CAD is flat at C$1.6923, while GBP/AUD and GBP/NZD hold steady at AU$1.8436 and NZ$1.9407 respectively.
In the spotlight today will be the latest US retail sales figures. Will a slump in sales growth last month send the US dollar lower later this afternoon?
What’s been happening?The pound maintained its bullish trajectory yesterday, as the currency continued to be underpinned by speculation the BoE may hike interest rates by the end of 2021.
This comes in spite of dovish comments from BoE policymaker Silvana Tenreyro, who suggested raising interest rates to counter temporary inflationary pressures would be ‘self-defeating’.
The euro, meanwhile, continued to struggle to find support on Thursday after European Central Bank (ECB) president Christine Lagarde reiterated the bank’s view that the recent spike in inflation is temporary.
At the same time, the US dollar continued to trend lower through yesterday’s session, as the currency was undermined by a prevailing risk-on mood as well as a decline in US Treasury yields.
Tempering these losses however was last week’s US jobless claims, as they revealed that the number of people filing for new unemployment claims dropped below 300,000 for the first time since the coronavirus pandemic began.
What’s coming up?Looking ahead, the mostly notable data release today will no doubt be the publication of the latest US retail sales figures.
September’s release is expected to report a contraction of sales growth, which could dampen the appeal of the US dollar again today.
Also influencing USD exchange rates may be the publication of the University of Michigan’s consumer sentiment index, which is expected to report a modest improvement in US household morale this month.
Meanwhile, the publication of the Eurozone’s latest trade figures could place some additional pressure on the euro this morning as they are expected to report a narrowing of the bloc’s trade surplus.
Finally, in the absence of any notable GBP data releases, we may see the direction of the pound continue to be dictated by BoE rate hike speculation.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)