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US dollar firms in risk-off trade

currency-newsUS dollar firms in risk-off trade
The US dollar trended higher on Friday, with the appeal of the safe-haven currency being buoyed by risk-off flows.

Meanwhile, trade in the pound is mixed at the start of this week, with GBP/EUR flat at €1.1682 and GBP/USD retreating to $1.2263. GBP/CAD has dipped to C$1.5878, while GBP/AUD and GBP/NZD climb to AU$1.7521 and NZ$1.9325, respectively.

In the spotlight today will be the latest US nonfarm payroll release. Will another robust expansion of employment growth help to bolster the US dollar?

What’s been happening?

The US dollar strengthened at the end of last week’s session as a prevailing risk-off mood continued to bolster demand for the safe-haven currency.

This upside was reinforced by the publication of the latest US non farm payrolls, after they reported the US economy added 428,000 jobs in April.

Meanwhile, after a slow start on the back of an abysmal German industrial production release.

The euro was buoyed by comments from Bundesbank President and European Central Bank (ECB) Governing Council member Joachim Nagel, in which he suggested he is ‘optimistic’ the ECB will raise interest rates in 2022.

At the same time, the pound was left to lick its wounds on Friday after taking a beating on Thursday, in response to the Bank of England’s alarming economic forecasts.

These losses were compounded by the Conservatives’ poor performance in the UK local elections, amid fears it could place additional pressure on Boris Johnson.

What’s coming up?

Turning to this week, all eyes are on Vladimir Putin as many observers expect the Russian President to use to country’s Victory Day celebrations to reframe the war in Ukraine, potentially even formally declaring war.

In turns of data a key focus in the first half of the week will be the publication of Germany’s latest ZEW economic sentiment index. If sentiment continued to deteriorate this month, it's likely the euro will stumble.

For USD investors the spotlight will be on the publication of the US consumer price index on Wednesday.

April’s figures are expected to report inflation began to cool in the US last month after striking a 40-year high in March. This pullback in inflation could weaken the US dollar if it is seen as easing pressure on the Federal Reserve to pursue more aggressive rate hikes.

Meanwhile, the pound could face an uphill battle this week amid lingering concerns over the Bank of England’s forecasts.
Philip McHugh

Philip McHugh

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)

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