US dollar bolstered by hawkish Fed expectations
Philip McHugh June 27th 2024 - 2 minute read
The US dollar firmed on Wednesday as investors trimmed their Federal Reserve interest rate cut bets.
Meanwhile, the pound is uneven so far this morning, with GBP/EUR flat at €1.1816 and GBP/USD ticking up to $1.2642. GBP/CAD is rangebound at CA$1.7302, while GBP/AUD slips to AU$1.8950 and GBP/NZD holds steady at NZ$2.0739.
Coming up, will a stalling of US durable goods orders weigh on the US dollar later this afternoon?
What’s been happening?
The US dollar rose in tandem with US Treasury yields during yesterday’s European session.
This uptick in yields and USD came amid hawkish Federal Reserve interest rate bets in the wake of comments from Fed policymaker Michelle Bowman on Tuesday.
Bowman said that she doesn’t see the need for an interest rate cut in 2024 and claims she would be open to a hike if inflationary pressures persist.
In contrast, the pound came under pressure on Wednesday as the Confederation of British Industry (CBI) published its latest distributive trades index.
The survey reported a sharp decline in UK retail sales volumes this month, dampening hopes that May’s rebound would be the start of a sustained recovery.
The euro also faced resistance yesterday with the release of Germany’s latest consumer confidence index, as it revealed morale in the Eurozone’s largest economy unexpectedly deteriorated as we head into July.
What’s coming up?
Turning to today’s session, the spotlight will be on the latest US durable goods orders data.
Economists forecast that order growth will have stalled in May, which may act as a headwind for the US dollar this afternoon.
USD investors will also be mindful of the latest US GDP data, following the downwards revision to the previous estimate. Any losses for the US dollar may be accentuated if we see a similar revision to the final reading.
For EUR investors the focus will be on the Eurozone’s latest economic sentiment index. Will a modest improvement in sentiment this month help the euro to claw back some of its recent losses?
Finally, in the absence of any notable UK economic data the pound may be left to trade sideways today.
Written by
Philip McHugh