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US dollar soars as recession fears spook markets

currency-newsUS dollar soars as recession fears spook markets
The US dollar rallied again on Monday, with demand for the safe-haven currency being underpinned by risk-off flows.

Meanwhile, the pound is firming this morning, while GBP/EUR is subdued at €1.1646, GBP/USD has climbed to $1.2186. GBP/CAD has rallied to C$1.5711, while GBP/AUD and GBP/NZD are buoyed at AU$1.7532 and NZ$1.9408, respectively.

Looking ahead, will an underwhelming UK jobs report limit Sterling’s gains today?


What’s been happening?

The US dollar got off to a roaring start this week, skittish investors flocking to the safe-haven currency amidst growing fears that a global recession may be looming.

Reinforcing the upside in the ‘greenback’ were rising bets that the Federal Reserve could raise interest rates by 75 basis points in the wake of Friday’s hotter-than-expected US inflation print.

This jump in the US dollar suppressed demand for the euro on Monday as a result of the negative correlation between the pairing.

The pound, meanwhile, stumbled yesterday in response to the latest UK GDP figures. April’s release reported UK economic growth unexpectedly contracted for the second consecutive month.

April’s surprise slump in growth gave rise to fresh concerns that the UK may be at risk of slipping into a recession this year.


What’s coming up?

The spotlight today will be on the publication of the UK’s latest jobs report.

April’s figures reported unemployment unexpectedly rose from 3.7% to 3.8%.

Alongside a weaker-than-expected wage growth reading, the jobs report might push the pound lower again today amidst speculation it could limit the Bank of England’s (BoE) appetite to continue raising interest rates.

For EUR investors the focus will be on Germany’s latest ZEW economic sentiment index. Will the euro weaken if investor sentiment in the Eurozone’s largest economy remains broadly downbeat this month?

Across the pond, we may see the US dollar extend its uptrend if the latest US PPI release reports producer prices continued to appreciate in May.
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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