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US dollar maintains positive trajectory on Fed rate hike speculation

currency-newsUS dollar maintains positive trajectory on Fed rate hike speculation
The US dollar trended broadly higher on Thursday as the currency was underpinned by expectations the Federal Reserve could hike interest rates in the near-term.

Meanwhile, the pound is trading in a narrow range so far this morning, with GBP/EUR muted at €1.1971 and GBP/USD flat at $1.3538. GBP/CAD is stable at C$1.7232, while GBP/AUD and GBP/NZD hold steady at AU$1.8924 and NZ$2.0057, respectively.

Coming up, will a strong US payroll reading help to extend the US dollar’s gains through to the end of this week’s session?

What’s been happening?

The US dollar trended higher through yesterday’s European session, as the publication of some hawkish FOMC minutes on Wednesday continued to lend support to the currency.

Further underpinning demand for the ‘greenback’ was a prevailing risk-off mood, which helped to offset a larger-than-expected fall in the latest ISM non-manufacturing PMI.

At the same time, the euro firmed on the back of Germany’s latest factory order figures, after they reported a much larger-than-expected rebound in order growth in November.

This countered the release of Germany’s latest inflation figures, which appeared to support the European Central Bank’s (ECB) view that the recent spike in inflation is ‘transitory’ as its Harmonized Index of Consumer Prices (HICP) fell for the first time in six months.

Meanwhile, the pound was left on the defensive yesterday after the UK’s latest PMI release confirmed growth in the vital services sector slowed last month.

What’s coming up?

Centre stage today will undoubtedly be the publication of the latest US non-farm payroll figures later this afternoon.

December’s release may bolster the US dollar as it’s expected to report the US economy added 400,000 jobs last month following the disappointing 210,000 added in November. However, another miss could send USD exchange rates sharply lower.

In the meantime, the release of the Eurozone's latest inflation reading will be in the spotlight for EUR investors this morning. If the reading for the whole of the bloc reports inflation slowed as expected the euro might weaken.

With GBP data releases thin of the ground through the remainder of the week it's likely the pound will be influenced by domestic Covid developments, with soaring cases potentially dampening Sterling sentiment.
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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