US dollar rallies following Fed minutes

Pound (GBP) supported by budget hopes

The pound (GBP) trended broadly higher through yesterday’s session, supported by reports suggesting that UK Chancellor Rachel Reeves has decided to change the government’s debt rules.

This will allow the government to borrow more, with GBP investors hoping this will provide the Chancellor with more fiscal headroom to increase infrastructure investment.

Looking ahead, with UK data in short supply, the pound may struggle to find direction today.

Euro (EUR) undermined by ECB remarks

The euro (EUR) faced headwinds on Wednesday, following dovish remarks from European Central Bank (ECB) policymakers.

The ECB’s Martins Kazaks suggested further interest rate cuts ‘are necessary’ due to the weakness of the Eurozone economy, while his colleague François Villeroy de Galhau stated another rate cut is ‘very likely’.

Today will see the publication of the minutes from the ECB’s September policy meeting. If these highlight that policymakers are open to another cut this month, the euro is likely to extend its losses.

US dollar (USD) strengthened by FOMC minutes

The US dollar (USD) initially traded with modest gains on Wednesday. While the currency benefitted from risk-off flows, USD investors were reluctant to make any aggressive bets as they awaited the publication of the minutes from the Federal Reserve’s September policy meeting.

The minutes then propelled USD exchange rates higher during the second half of the US trading session after they signalled most Fed policymakers don’t see September’s bumper rate cut being repeated in November.

The publication of the latest US consumer price index will be in the spotlight today. September’s CPI figures are expected to report US inflation continues to cool. Could this revive bets for a 50bps rate cut next month and sink the US dollar?

Canadian dollar (CAD) dented by sliding oil prices

The Canadian dollar (CAD) was subdued on Thursday as a softening of oil prices weakened the appeal of the commodity-linked currency.

In the absence of any notable CAD data today, the ‘loonie’ may continue to trade in tandem with oil prices.

Australian dollar (AUD) buoyed by risk-on flows

The Australian dollar (AUD) mounted a modest recovery overnight on Wednesday, supported by a rebound in market risk appetite.

New Zealand dollar (NZD) firms amid improving market mood.

The New Zealand dollar (NZD) also ticked higher in overnight trade, thanks to a positive shift in market risk sentiment.