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.
Sterling is trading a little more robustly so far this morning, with GBP/EUR stable at €1.1784 and GBP/USD buoyed at $1.3609. GBP/CAD is flat at C$1.6923, while GBP/AUD and GBP/NZD hold steady at AU$1.8544 and NZ$1.9625 respectively.
Looking ahead, will a strong US inflation print propel the US dollar higher later this afternoon?
What’s been happening?The pound wavered during yesterday’s session, following the publication of the UK’s latest jobs report.
While August’s figures revealed that the UK’s jobless rate dropped to a one-year low of 4.5%, the upside in Sterling was tempered by concerns that unemployment will have subsequently risen following the end of the government’s furlough scheme in September.
Also capping the Pound’s gains were renewed Brexit concerns as a speech by the UK’s Brexit Minister David Frost, reignited tensions with the EU by suggesting the Northern Ireland protocol should be torn up.
The euro, meanwhile, fell back on Tuesday, in the wake of Germany’s ZEW survey, after September’s index revealed economic sentiment in the Eurozone’s largest economy tumbled to its worst levels since the start of the coronavirus pandemic.
Finally, we saw the US dollar trade with modest gains during the European trading session, with a cautious market mood and rising US Treasury yields bolstering the appeal of the ‘greenback’.
What’s coming up?Top of the agenda today will undoubtedly be the publication of the US consumer price index.
Economists forecast that US inflation will have remained stubbornly high in September, which could be supportive of the US dollar as it bolsters expectations that the Federal Reserve will start tapering its asset purchases next month.
In the meantime, the publication of the UK’s latest GDP figures earlier this morning could undermine the pound today, after reporting that the economy expanded less than expected in August.
For EUR investors the focus will be on the latest Eurozone industrial production report. Will a sizeable slump in factory output in the bloc push the euro even lower this morning?
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)