The Australian dollar trended lower through the majority of last week, with the risk-sensitive currency struggling to attract support as a gloomy market mood prevailed through most of the session.
Meanwhile, trade in Sterling is a little mixed this month, with GBP/EUR stable at €1.1897 and GBP/USD flat at $1.3040. GBP/CAD has slipped to C$1.6628, while GBP/AUD and GBP/NZD retreat to AU$1.8063 and NZ$1.9239, respectively.
Coming up, will a hawkish interest rate hike from the Federal Reserve help to propel the US dollar sharply higher this evening?
What’s been happening?
The pound strengthened during yesterday’s session as an upbeat jobs report helped to reaffirm expectations for a Bank of England (BoE) rate hike this week.
According to data published by the Office for National Statistics (ONS), unemployment in the UK unexpectedly fell to a pre-pandemic low of 3.9% in January, while wage growth accelerated at a faster-than-expected pace over the same period.
The euro initially found support yesterday, with the single currency being underpinned by hopes the latest round of Russia-Ukraine peace talks could yield results in the coming days.
However the single currency subsequently relinquished a good portion of these gains following dovish comments from European Central Bank (ECB) President Christine Lagarde.
Meanwhile, the US dollar was met by modest selling pressure in European trade on Tuesday, with improving market sentiment limiting safe-haven demand.
Further limiting the ‘greenback’s upside potential was the reluctance from USD investors’ to make any aggressive bets ahead of the Federal Reserve’s latest interest rate decision.
What’s coming up?
Centre stage today will be the conclusion of the Federal Reserve’s March policy meeting.
This is widely expected to see the US central bank deliver a quarter-percentage increase in interest rates. Its first rate hike since 2018.
With the hike largely priced in by USD investors the focus will primarily be on Fed’s forward guidance.
This could see the ‘greenback’ surge if the bank signals it may more aggressively raise interest rates in the future.
In the meantime, the euro is likely to remain highly sensitive to developments in Ukraine. Will peace talk optimism continue to underpin the euro?
Finally, the absence of any notable UK data as well as the BoE’s looming interest rate decision could limit movement in the pound today.
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)