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US dollar tempered by Fed Chair speculation

currency-newsUS dollar tempered by Fed Chair speculation
The US dollar traded in a narrow range on Tuesday as another rise in US PPI was offset by speculation that Jerome Powell could be replaced as Chair of the Federal Reserve.

The pound, meanwhile, is holding in a narrow range so far this morning, with GBP/EUR stable at €1.1707 and GBP/USD muted at $1.3544. GBP/CAD is rangebound at C$1.6820, while GBP/AUD and GBP/NZD hold steady at AU$1.8391 and NZ$1.9053 respectively.

Looking ahead, the publication of the latest US CPI figures will be in the spotlight today. Will a sharp rise in US inflation bolster USD exchange rates?


What’s been happening?

The US dollar struggled to find any strong directional bias yesterday, in spite of the US reporting an expected rise in producer prices.

The limited upside in the ‘greenback’ appeared driven by speculation that President Joe Biden may choose to replace Jerome Powell as Chair of the Fed with Governor Lael Brainard, who is generally perceived as being more dovish than Powell.

At the same time, the euro traded with modest gains on Tuesday, following the publication of Germany’s ZEW index, after it reported a surprise improvement in economic sentiment this month, with survey respondents more optimistic in their outlook for the next six months.

Meanwhile, after an initial uptick, the pound was placed on the defensive yesterday, amidst fears the UK government could follow through with its threat to trigger Article 16 of the Northern Ireland protocol.


What’s coming up?

Centre stage today will no doubt be the publication of the latest US consumer price index.

October’s CPI figures are expected to report a sharp acceleration of US inflation, with the consensus estimate predicting price growth will have shot up from 5.4% to 5.8%.

This could bolster demand for the US dollar today as another jump in inflation may be seen as placing more pressure on the Federal Reserve to take more decisive action.

In the meantime, Germany published its own CPI print this morning. October’s finalised figures confirmed inflation in the Eurozone’s largest economy accelerated from 4.1% to 4.5%, but with the European Central Bank (ECB) still committed to its dovish bias, its impact on the euro looks to be limited.

With UK data still thin on the ground today, the pound may be left vulnerable to Brexit jitters.
 
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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