US dollar recoups losses as risk appetite wanes

Philip McHugh December 7th 2022 - 2 minute read

The pound and euro initially found success yesterday, but resurgent strength in the US dollar saw the European currencies slip.

The pound is edging higher this morning, attempting to regain ground lost overnight. GBP/EUR is fairly flat at €1.1592 while GBP/USD has risen to $1.2147 and GBP/CAD has climbed to CA$1.6612. GBP/AUD is also up, at AU$18159, while GBP/NZD is moving sideways around NZ$1.9191.

Today, the Eurozone’s third estimate for its GDP growth rate could affect EUR, if it differs from previous readings. Otherwise, risk appetite may drive most movement.

What’s been happening?

The pound witnessed some volatility yesterday, though it managed to move higher overall. Sterling was seemingly supported by a dop in UK food inflation, which raised hopes about a turning point in the country’s cost-of-living crisis.

Meanwhile, the euro also enjoyed an initial upside after German factory orders recovered more than expected in October. Investors grew optimistic that Germany’s recession may be milder than feared.

At the same time, the safe-haven US dollar dipped as investors leant towards riskier currencies.

However, the market mood soured as the session went on, lifting USD and putting some pressure on GBP and EUR.

What’s coming up?

Notable data is thin on the ground today, with the latest third-quarter GDP growth rate for the Eurozone the only key release. As this is the third estimate, it will likely only trigger movement if it differs from previous readings. Could a stronger growth rate boost EUR?

Elsewhere, risk appetite may influence both Sterling and the US dollar. The market mood seems mixed at the moment; if it sours, the riskier pound could slip while the safer dollar strengthens.

Federal Reserve interest rate rise bets could cause some volatility. After the strong American PMI earlier this week, investors are now unsure whether the Fed will opt for a 50bps or 75bps hike at next week’s meeting. This uncertainty could cause some choppy trade.

Written by
Philip McHugh

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