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US dollar retreats as Trump keeps stimulus hopes alive

currency-newsUS dollar retreats as Trump keeps stimulus hopes alive
The US dollar ticked lower on Wednesday after Donald Trump appeared to soften his stance regarding more stimulus.

Meanwhile, the pound is firming so far this morning, with GBP/EUR buoyed at €1.0997 and GBP/USD edging up to $1.2946. GBP/CAD is flat at C$1.7148, while GBP/AUD and GBP/NZD hold steady at AU$1.8069 and NZ$1.9651, respectively.

Coming up today, the focus looks to be on the minutes from the European Central Bank’s (ECB) latest policy meeting, which may offer more insight into the bank’s policy outlook.

What’s been happening?

The US dollar weakened in mid-week trade, with the ‘Greenback’ losing some of its safe-haven appeal after Trump tweeted that he would be open to some limited stimulus measures.

USD exchange rates then remained on the back foot through yesterday evening as the latest FOMC minutes highlighted the Federal Reserve’s concerns that the US economic recovery could be undermined without more fiscal stimulus.

The US dollar’s weakness through Wednesday’s European session helped the euro to nudge higher thanks to the negative correlation in the pairing, and allowed the single currency to shrug off a shock contraction in German industrial production in August.

Meanwhile, the pound found itself on the defensive through much of yesterday’s session in response to ongoing Brexit jitters.

While UK-EU trade talks have shown some positive progress in recent weeks, reports suggest the two side are still struggling to close the gap on a small number of key issues such as fishing rights, leading Sterling to stumble on fears a no-deal Brexit remains a clear risk.

What’s coming up?

Centre stage today will be the minutes from the European Central Bank’s September policy meeting.

These could put some pressure on the euro today if they reveal the ECB is growing increasingly pessimistic regarding the Eurozone’s economic recovery or highlight the bank’s concerns over weak inflation in the bloc.

For GBP investors the focus is likely to remain squarely on Brexit as we enter the final week before the EU summit on 15 October. This will likely infuse fresh volatility in the pound as it grows increasingly sensitive to headlines.

Across the pond, we may see US political uncertainty start to increasingly influence the US dollar through the second half of the week, potentially overshadowing today’s initial jobless claims.
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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