US dollar extends rally as markets trim Fed rate cut bets
Philip McHugh January 14th 2025 - 2 minute read
Pound (GBP) rocked by UK bond turmoil
The pound (GBP) opened this week on the back foot, falling to new multi-month lows amid another rise in UK borrowing costs.
However, Sterling was able to recoup the bulk of these losses by the end of the session after borrowing costs began to fall again.
Unsurprisingly, GBP exchange rates are likely to remain sensitive to UK bond market movements today, potentially resulting in additional volatility in the pound.
Euro (EUR) dented by USD strength
The euro (EUR) struggled on Monday as it continued to be undermined by its negative correlation with the US dollar (USD).
Adding to the pressure on the single currency was a report showing that business confidence in the Eurozone continues to weaken.
EUR investors will look to a speech by European Central Bank (ECB) policymaker Philip Lane for fresh impetus today, with the euro poised to fall if he strikes a dovish note.
US dollar (USD) soars on Fed rate cut uncertainty
The US dollar got off to a roaring start this week as it carried over its momentum from Friday’s stronger-than-expected payroll figures.
USD exchange rates soared as the bumper payroll print softened expectations Federal Reserve might cut interest rates this year.
The spotlight today will be on the latest US producer price index. The prelude to Wednesday’s highly anticipated US consumer price index is expected to point to persistent inflationary pressures, which may further undermine Fed rate cut bets and extend the USD rally.
Canadian dollar (CAD) bolstered by rising oil prices
The Canadian dollar (CAD) firmed on Monday, with the currency drawing support from rising oil prices and its positive trading relationship with the US dollar.
If oil prices continue to accelerate, expect to see the ‘loonie’ maintain a positive trajectory today.
Australian dollar (AUD) buoyed by risk-positive mood
The Australian dollar (AUD) rallied overnight on Monday as a correction in the US dollar helped to bolster market risk appetite.
New Zealand dollar (NZD) strengthens as business morale improves
The New Zealand dollar (NZD) mounted a convincing recovery in overnight trade, with the ‘kiwi’ being underpinned by a sharp rise in domestic business confidence in the last quarter of 2024.
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Written by
Philip McHugh