US dollar demand touches multi-week highs
Daily Currency Update
The US dollar (USD) rose to multi-week highs, outperforming its peers after the release of employment data. The data, published by Automatic Data Processing (ADP), showed that the US private sector employment grew by 324,000 in July. This reading exceeded the market expectations for an increase of 189,000 and gave additional support to the USD. June's figures were revised lower from 497,000 (the highest since February 2022) to 455,000.Demand for USD was supported by of the US’s credit rating.
On Tuesday, global credit rating agency Fitch announced that it downgraded the US government's credit rating to AA+ from AAA, quoting expected fiscal weakening over the next three years and a high and rising general government debt burden. This development caused uncertainty among market participants, and they stayed away from risk-sensitive assets, creating demand for the safe-haven USD.
The US Dollar Index that measures the USD's performance against a basket of six major currencies sustained above the 102 levels despite the slippage noted during the American session on Tuesday and moved ahead to a three-week high near 102.50 levels today.
Key Movers
The euro (EUR) accelerated its losses and is under increasing selling pressure against the US dollar (USD), taking the EUR/USD back to the 1.0950 levels, the EUR/USD pair was seen adding to its losses for the third consecutive session so far. The weak EUR is the result of the release of positive employment data from the US and Fitch downgrading the US government’s credit rating. The lack of major data releases from the Eurozone leaves the market participants to take cues from the US data releases.The Bank of England (BoE) is scheduled to announce its key Interest Rate Decision on Thursday and is anticipated to hike rates by 25 basis points to 5.25%. Markets are also weighing in the options of a larger hike, 50 basis points to 5.50%. Inflation in the United Kingdom economy has been very sticky and most stubborn amongst the G-7 economies; hence, the BoE isn’t in a position to halt the rate-tightening cycle. Sterling was seen struggling against the Greenback and the GBP/USD pair was last seen trading at 1.2692 levels.
WTI crude oil was seen working hard to keep its bullish momentum intact after a 4-day uptrend when it touched the highest level since April 17. WTI was last seen trading at the 79.24 levels.
Expected Ranges
- EUR/USD: 1.0923 - 1.1014 ▼
- GBP/USD: 1.2685 - 1.2801 ▼
- AUD/USD: 0.6532 - 0.6629 ▼
- USD/CAD: - 1.3347 ▲