The pound collapsed on Friday as markets were rattled by the contents of UK Chancellor Kwasi Kwarteng’s mini-budget.
Risk sentiment shifted dramatically the following day, boosting USD, as China-US tensions escalated over an American delegation’s visit to Taiwan, which China views as a breakaway province.
Despite a return of risk appetite, the ‘greenback’ losses were tempered on Wednesday as the US services PMI and factory orders report unexpectedly improved.
This strong data added to expectations of more hawkish action from the Federal Reserve, with policymakers hinting at further rate hikes throughout the week.
Rate rise bets then saw USD jump higher on Friday following some positive jobs data. Non-farm payrolls printed at 528,000, more than double the expected figure, while the US unemployment rate unexpectedly fell to pre-pandemic levels.
The US dollar is somewhat subdued today amid a lack of US data and a fairly upbeat market mood.
The main focus for USD investors this week is Wednesday’s inflation data. Economics expect core and headline inflation to rise and fall, respectively. If inflation continues to rise, or seems to be becoming embedded, the ‘greenback’ could strengthen.
A forecast rise in US consumer sentiment on Friday may also boost USD.
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)