More Gains for the Dollar?
The US dollar raced higher on Tuesday as markets reacted to some particularly hawkish comments from Federal Reserve Chair Jerome Powell.
Meanwhile, the pound is trading in a narrow range so far this morning, with GBP/EUR flat at €1.1221 and GBP/USD stable at $1.1830. GBP/CAD is rangebound at CA$1.6274, while GBP/AUD and GBP/NZD hold steady at AU$1.7924 and NZ$1.9333, respectively.
Looking ahead, will some strong US employment figures lead to more gains for the US dollar today?
What’s been happening?
The US dollar skyrocketed yesterday as Federal Reserve Chair Jerome Powell struck a notably hawkish tone in a testimony before Congress.
Powell stunned markets by suggesting the Fed might accelerate the pace of its interest rate hikes, with USD exchange rates surging as the odds of a 50bps increase in March climbed to 70%.
The euro opened Tuesday’s session with a spring in its step after German factory orders unexpectedly rose in January.
These gains were later clipped by the single currency’s strong negative correlation with the US dollar.
At the same time, the pound initially held its ground. Buoying Sterling sentiment were hawkish comments from Bank of England (BoE) policymaker Catherine Mann.
However, GBP investors appeared particularly rattled by the prospect of higher US interest rates, leading the pound to stumble in the afternoon.
What’s coming up?
The release of Germany’s latest industrial production figures is lending support to the euro at the start of today’s session. January’s figures reported a stronger-than-expected rebound in production which is helping to ease concerns over growth in the Eurozone’s largest economy.
A speech by European Central Bank (ECB) President Christine Lagarde could underpin the euro’s upside potential later this morning if she echoes some of her colleagues in hinting at multiple additional rate hikes from the bank this year.
US labour figures will likely act as the main catalyst of movement for the US dollar today. Will a robust increase in February’s ADP employment report or another elevated JOLTs release reinforce Fed rate hike bets and extend the US dollar’s bullish run?
Meanwhile, the continued absence of any notable UK data may leave the pound to tread water through today’s session.
Need a chat about moving your money around? Contact Alastair on alastair.archbold@currenciesdirect.com to find out more about the latest news or how it could impact your currency transfers or your local agent Fiona on fiona.warren_agent@currenciesdirect.com.
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