US dollar jumps as key data exceeds expectations

Philip McHugh December 6th 2022 - < 1 minute read

The US dollar leapt higher yesterday after unexpectedly strong American data revived Federal Reserve interest rate rise bets.

This morning the pound is softening, with GBP/EUR slipping to €1.1604 and GBP/USD down to $1.2174. GBP/CAD is muted at CA$1.6561, while GBP/AUD and GBP/NZD are both weaker at AU$1.8118 and NZ$1.9249, respectively.

Market-moving data releases are thin on the ground today, so global risk sentiment could drive most movement.

What’s been happening?

The US dollar surged yesterday after two key American data releases exceeded forecasts. The ISM services PMI unexpectedly improved, rising from 54.4 to 56.5, while US factory orders grew by 1%, rather than 0.7%.

These releases indicated ongoing strength in the US economy and may convince some Federal Reserve policymakers to argue for a larger interest rate rise at the central bank’s next meeting.

The euro also benefitted from rate hike expectations, as three European Central Bank (ECB) officials all hinted at further rate rises to come.

Meanwhile, the pound traded without a clear directional bias after the final UK services PMI printed as expected.

What’s coming up?

Trading conditions may remain rather thin through today’s session, with no key data releases for the US, UK or Eurozone. As a result, risk appetite could drive significant movement.

If investors grow concerned about a looming global recession or higher interest rates, the safe-haven US dollar could strengthen and the riskier pound could fall.

Sterling may also be driven by domestic headlines. Any fresh stories about the UK’s cost-of-living crisis could hurt GBP.

As for the euro, stronger-than-expected German factory order growth may lend EUR some support this morning. Looking forward, Russia-Ukraine news could dominate the common currency’s movement.

Written by
Philip McHugh

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