US dollar soars to new 2021 high in risk adverse trade

Philip McHugh September 30th 2021 - 2 minute read

The US dollar rocketed higher against the majority of its peers on Wednesday, amidst notable safe-haven flows.

Meanwhile, the pound is holding its ground so far this morning, with GBP/EUR flat at €1.1577 and GBP/USD muted at $1.3424. GBP/CAD is rangebound at CA$1.7104, while GBP/AUD and GBP/NZD hold steady at AU$1.8669 and NZ$1.9537 respectively.

Coming up, will a surge in German inflation help to buoy the euro today? Or will the European Central Bank’s (ECB) reluctance to tighten monetary policy see EUR investors shrug it off?

What’s been happening?

The US dollar saw considerable demand through yesterday’s trading session as a prevailing risk-off mood prompted investors to favour the safe-haven currency.

This came as investors were spooked by Chinese growth concerns as well as the potential for the US to hit its debt ceiling next month.

The negative correlation between the US dollar as the euro lead to EUR exchange rates weakening on Wednesday as the latter strengthened, although the single currency’s losses were limited by the Eurozone’s stronger-than-expected economic sentiment index.

The pound, meanwhile, extended its sell off into another session, as the UK’s ongoing fuel crisis continued to stoke concerns over the trajectory of the UK’s economic recovery.

What’s coming up?

Turning to today’s session the highlight for traders looks to be the publication of Germany’s consumer price index.

September’s preliminary CPI figures are expected to report German inflation rocketed up to 4.2%, but with the surge unlikely to be enough to convince the ECB to start tightening monetary policy, any upside potential in the euro looks limited.

In the meantime, despite the UK’s latest GDP release printing above expectations, reporting a 5.5% rebound in growth in the second quarter. The pound may continue to face an uphill battle today, amidst concerns over the end of the government’s furlough scheme.

Finally, the US will publish its own Q2 GDP figures this afternoon alongside its latest jobless claims. Will some upbeat releases allow the US dollar to extend its bullish run?

Written by
Philip McHugh

Select a topic: