The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
The threat of an equity market selloff triggered by Chinese property giant Evergrande‘s debt, Europe’s mounting energy crisis, global supply chain issues, and China’s power outages halting factory production soured market sentiment.
In addition, political deadlock in US Congress contributed to cautious trade as fears grow the US will hit its debt ceiling on 18th October and default on debt payments.
At the same time, USD moved higher in line with rising US Treasury yields, which had risen since the Federal Reserve signalled tapering its bond-buying purchases in its September policy meeting.
Upwardly revised US second quarter GDP data also bolstered the US dollar, coming in at 6.7% instead of the initial forecast of 6.6%.
However, USD gains were tempered at the end of the week in upbeat beginning of the month trade that weighed on safe-haven demand.
But a stronger-than-expected 61.1 expansion in the ISM manufacturing PMI for September, up from August’s 59.9, limited USD losses by improving the US growth outlook.
Looking ahead, shifting risk appetite, progress in Congress on the US debt ceiling, and changes in US Treasury yields look likely to continue driving USD movement.
High-impact data could also cause significant movement, starting with September’s ISM non-manufacturing PMI.
Service sector activity is expected to remain firmly in expansion at 60. Although down from August’s 61.7 reading, the data could still offer the ‘Greenback’ support.
The highly influential US non farm payrolls report on Friday is the key data release this week.
With employment forecast to rise, the jobs report may provide the Federal Reserve with enough evidence that the US economy is recovering sufficiently for the central bank to tighten its monetary policy sooner than expected, and in turn bolster USD exchange rates.
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)