The US dollar was placed on the defensive on Friday due to doubts whether the Federal Reserve will be willing to hike interest rates amidst worries over a new Covid variant of concern.
Sterling looks to be licking its wounds so far this morning, with GBP/EUR muted at €1.1585 and GBP/USD dipping to $1.3504. GBP/CAD and GBP/NZD are holding steady at CA$1.7146 and NZ$1.9465 respectively, while GBP/AUD retreats to AU$1.8657.
Looking ahead, will a drop in Eurozone economic sentiment put some pressure on the euro this morning?
The pound nosedived through yesterday’s trading session, as GBP investors were spooked by the potential economic impact of the UK’s shortage at the fuel pumps.
What’s been happening?
With 90% of the country’s petrol stations reporting a shortage of fuel, and the panic buying showing no signs of abating, GBP investors grew increasingly concerned over the potential economic consequences, if workers and businesses find themselves starting to run dry.
Analysts warn that should the shortages persist into next week, the UK’s already shaky economic recovery could be further undermined.
The US dollar, meanwhile, enjoyed solid support on Tuesday, with investors flocking to the safe-haven currency as a bearish market mood prevailed.
This upside in the US dollar was reinforced by Federal Reserve Chair Jerome Powell as he reiterated the bank’s intentions to begin tapering its asset purchases in his latest testimony before Congress.
At the same time, the euro’s negative correlation with the US dollar, coupled with concerns over Europe’s energy price crisis undermined EUR exchange rates and limited the single currency gains against its other peers.
Coming up this morning, we have the publication of the Eurozone’s latest consumer sentiment index.
What’s coming up?
September’s figures are expected to report that economic sentiment weakened again this month, but with the index expected to remain close to historic highs, any downside in the euro could prove limited.
A scheduled speech from Bank of England (BoE) Governor Andrew Bailey could offer the pound some respite later this afternoon, if Bailey drops additional hints that the BoE could hike interest rates early next year.
Finally, in the absence of any notable USD data releases, movement in the US dollar may continue to be dictated by market sentiment, potentially leading the ‘greenback’ to appreciate further if risk appetite continues to weaken.
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)