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US dollar turbocharged by global recession fears

currency-newsUS dollar turbocharged by global recession fears
The US dollar was catapulted higher on Friday, with investors flocking to the safe-haven currency amid a prevailing risk-off mood.

Meanwhile, trade in the pound is mixed at the start of this week, with GBP/EUR buoyed at €1.1617 and GBP/USD ticking up to $1.2120. GBP/CAD is rangebound at C$1.5594, while GBP/AUD and GBP/NZD rally to AU$1.7679 and NZ$1.9436, respectively.

Looking ahead, will a narrowing of Germany’s trade surplus see the euro struggle at the start of this week’s session?

What’s been happening?

The US dollar raced higher at the end of last week as demand for the safe-haven currency was bolstered by global recession fears.

Also buoying USD exchange rates were rising bets for more aggressive rate hike bets from the Federal Reserve.

However, these gains were then capped with the release of the ISM manufacturing PMI, after US factory sector growth slowed more than expected last month.

The euro also rallied on Friday, albeit not as strongly as the US dollar, in response to the Eurozone’s latest inflation release.

June’s preliminary figures reported inflation in the bloc shot to a new record high of 8.6%, beating forecasts for a more modest rise to 8.4%.

Meanwhile, the pound retreated at the end of last week’s session, with investors shunning the currency as the market mood soured.

These losses were compounded by the release of the UK’s latest manufacturing PMI after June’s finalised figures were revised down to report the UK’s factory sector suffered its worst month of growth in two years.

What’s coming up?

Turning to this week, the only data of note at the start of the session is Germany’s latest trade figures, in which a narrowing of the country’s trade surplus in May sees the euro get off to a muted start.

Meanwhile, with GBP data releases thin on the ground this week, movement in the pound may be dictated by domestic headlines.

This could lead Sterling to face an uphill battle amid renewed Brexit tensions and ongoing concerns over the UK’s summer of discontent, which could see the economy disrupted by strike action from several different unions.

Across the pond, with US markets closed for a federal holiday, thin trading conditions in the US dollar could leave it to trade sideways at the start of the 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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