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US dollar rallies as market risk appetite sours

currency-newsUS dollar rallies as market risk appetite sours
The US dollar rebounded on Friday, with a prevailing risk-off mood and rising US Treasury yields helping to bolster the appeal of the ‘greenback’.

Meanwhile, the pound is subdued so far this morning, with GBP/EUR muted at €1.1815 and GBP/USD slipping slightly at $1.3672. GBP/AUD is edging higher at AU$1.8227, while GBP/CAD and GBP/NZD are flat at C$1.6939 and NZ$1.9061, respectively.

Looking ahead, will a robust ISM manufacturing PMI help to extend the US dollar’s upward momentum into the start of this week?
 

What’s been happening?

The US dollar closed last week’s session on a high, with the currency soaring as a souring market mood saw investors favour the safe-haven currency.

Reinforcing the uptick in USD exchange rates was a rise in US Treasury yields, in anticipation of a taper announcement from the Federal Reserve later this week.

The renewed demand for the US dollar undermined the euro on Friday, due to the strong negative correlation between the pairing, with the single currency also struggling to attract support after a weaker-than-expected German GDP reading overshadowed positive Eurozone inflation and growth figures.

The pound, meanwhile, traded without any strong directional bias at the end of last week as the escalating spat between the UK and France regarding fishing rights gave rise to additional Brexit jitters.
 

What’s coming up?

Kicking off this week’s session was the publication of Germany’s latest retail sales figures.

These could place some pressure on the euro this morning, after they revealed retail sales growth in the Eurozone’s largest economy unexpectedly contracted -2.5% in September.

This will be followed by the publication of the UK’s latest manufacturing PMI later this morning. October’s finalised figures could provide some support to the pound, if they confirm activity in the UK’s factory sector improved as expected.

However, the most impactful release of the day looks to be the publication of the ISM manufacturing PMI this afternoon.

This is expected to report that the US factory sector continued to expand at a robust pace last month, bolstering the appeal of the US dollar at the start of this week.
 
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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