US GDP data bolsters positive USD movement
Daily Currency Update
The dollar index (DXY) has a good cushion after the GDP and jobs data release, trading around 103.00. Federal Reserve Chair Jerome Powell's speech on Wednesday gave the markets little new information as he repeated a similar sentiment to past comments. Powell made it clear that the Fed is committed to two more interest-rate hikes, possibly consecutive ones in the upcoming policy meetings. According to the Chicago Mercantile Exchange (CME) Group’s FedWatch tool, the markets are pricing in an 81.8% chance of a 25 basis points (bps) hike at the July 26th decision. The USD was on a seesaw against the rest of the world it seems with the Greenback up against almost every major currency during the Asian trading session, down during the European trading session, and now back up at the beginning of the US trading session.Two key sets of data gave the USD a boost. The first and most important one was US Gross Domestic Product (GDP) for Q1 which came in at 2% up from 1.3%. The second set of data was initial jobless claims which went from 265,000 to 239,000. These positive numbers should ease some recession fears for now.
Key Movers
The EUR gave away most of its gains after the release of firm US GDP and jobs data. EUR/USD was last seen trading at 1.0862 levels. The sour market sentiment in the risk complex is followed by the European Central Bank (ECB) representative’s maintaining a hawkish tone at the ECB forum in Portugal on Wednesday, stressing that current policy measures are still not sufficiently restrictive. This leaves the European markets with a mixed sentiment, confused by Spanish inflation declining less than expected and signs that German inflation may spike. This sparks the risk that additional monetary tightening might be considered necessary by the ECB.Bank of England (BoE) Governor Andrew Bailey noted the central bank’s readiness to do what was needed to get inflation under control. Inflation continues to stand well above the BoE’s 2% target and worries about continuous price increases are becoming deep-rooted in the UK economy. Bailey also said, “Data showed clear signs of persistence of inflation," suggesting further rate hikes. GBP/USD was under constant pressure, touching the low of 1.2596.
West Texas Intermediate (WTI) oil holds on to its mild gains at the 70.30 level for the second consecutive day. This uptick was also due to the Energy Information Administration (EIA) crude oil stocks data release, which showed a substantial drop in inventories that exceeded market expectations.
Expected Ranges
- EUR/USD: 1.0864 - 1.0937 ▼
- GBP/USD: 1.2596 - 1.2664 ▼
- AUD/USD: 0.6596 - 0.6638 ▼
- USD/CAD: 1.3242 - 1.3282 ▼