US dollar weakens in bullish trade

The US dollar was left on the back foot on Wednesday amid a prevailing risk-on mood.

Meanwhile, the pound is mostly rangebound this morning, while GBP/EUR has retreated to €1.1982, GBP/USD is flat at $1.3069. GBP/CAD is stable at C$1.6313, while GBP/AUD and GBP/NZD hold steady at AU$1.7565 and NZ$1.9247, respectively.

Looking ahead, will comments by Federal Reserve Chair Jerome Powell be able to revive demand for the US dollar today?

What’s been happening?

The US dollar trended broadly lower through yesterday’s European session as demand for the safe-haven currency was dented by a bullish market mood.

Adding to the ‘greenback’s woes was a continued pullback in US Treasury yields. Although these losses were tempered somewhat by hawkish Federal Reserve interest rate hike expectations.

This weakening of the US dollar, alongside stronger-than-expected Eurozone trade figures and a robust industrial production print, helped to prop up demand for the euro on Wednesday.

However, these gains were capped by concerns over Ukraine as Russia’s siege of Mariupol continued.

Finally in the absence of any notable domestic data, the pound was left to trade without any strong direction yesterday.

While Sterling benefitted from an improving market mood, it was unable to attract much support amidst uncertainty over the Bank of England’s (BoE) next interest rate decision.

What’s coming up?

Turning to today’s session, some hawkish comments from European Central Bank (ECB) policymakers, hinting at the possibility of a July rate hike, have helped the euro get off to a strong start.

However, the latest Eurozone consumer confidence figures could temper these gains later in the session, with another deterioration in household sentiment this month potentially taking its toll on the single currency.

USD investors will be keeping a close eye on Fed Chair Jerome Powell’s speech at the IMF/World Bank meeting, with the US dollar potentially surging if he signals the Fed is prepared to accelerate its current tightening cycle.

Meanwhile GBP investors will look to Bank of England policymaker Catherine L Mann for fresh impetus today, with the pound potentially stumbling if she strikes a cautious tone.