US dollar climbs to new multi-month highs

The US dollar rallied on Monday as a downbeat market mood led investors to favour the safe-haven currency.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR stumbling to €1.1509 and GBP/USD retreating to $1.2176. GBP/CAD is rangebound at CA$1.6423, while GBP/AUD and GBP/NZD hold steady at AU$1.9036 and NZ$2.0478, respectively.

Coming up, will a deterioration in US consumer sentiment weigh on USD exchange rates later this afternoon?

What’s been happening?

The US dollar opened this week’s session on the front foot, with the safe-haven currency attracting support as a risk-off mood prevailed.

This came amid growing fears over China’s economic outlook, amid further strain in the country’s property sector.

However, capping the upside in USD exchange rates was growing concern that the US could be at risk of another government shutdown.

The pound, meanwhile, stumbled on Monday amid fresh warnings over the UK’s economic trajectory.

A report from KPMG suggested there are ‘renewed signs of stress’ in the UK and that the economy could ‘struggle to keep its head above water’ in the second half of 2023.

At the same time, the euro was muted yesterday as the IFO research institute’s latest business climate index reported morale in Germany continued to deteriorate this month.

What’s coming up?

The only data of note today will be the publication of the latest US consumer confidence figures.

September’s index is expected to report household morale continues to deteriorate. Could this potentially weaken the appeal of the US dollar later this afternoon? Or will the possibility of a US government shutdown weaken USD?

In the absence of any notable UK data, it’s likely that the increasingly risk-sensitive pound will take its cues from market sentiment, potentially leading Sterling to stumble if a bearish mood continues to prevail.

Finally, the euro could struggle for direction as EUR investors continue to brace for the Eurozone’s upcoming inflation figures.