US dollar under selling pressure amid banking turmoil
Thursday 16 March, 2023
Daily Currency UpdateYesterday's sell-off of the Swish-based Credit Suisse stocks caused turmoil in the banking system and a flight to more safe haven currencies, like the US dollar, pushing the DXY past the 105.00 mark. Today the US dollar is under selling pressure as overall fears in the banking sector seem to be somewhat diminished as the Swiss Central Bank extended aid to Credit Suisse, reducing the need for safe haven currencies. Additionally, the market is showing a stronger conviction that the Federal Reserve will raise its rate by 25 basis points during the March 22nd meeting. Today's announcement by the European Central Bank (ECB) to raise its policy rate by 50 basis points could provide guidance for the Fed as it struggles to combat inflation amid recent banking turmoil. Data published by the US Department of Labor showed initial jobless claims came for the week of March 11th came in better than expectations at 192,000 versus the anticipated 205,000. In the housing sector, February saw a 13.8% month-over-month increase in Building Permits and a 9.8% expansion in Housing Starts.
Key MoversThe EUR managed to bounce back today from its worst session of the year yesterday to trade around 1.05980. The ECB announced its decision to raise policy rates by 50 basis points today, in line with market expectations. In its policy statement, the ECB renewed the importance of being data-dependent due to the recent uncertainty in the banking system. Its approach to policy rate decisions will be based on the inflation outlook considering new economic and financial data. The pound held firm against the dollar in today's trading session at the 1.20480 mark. There appears to be a degree of calm in the markets after the recent turmoil in the US and European banking system. In yesterday's spring budget statement, UK finance minister, Jeremy Hunt, pledged to grow the economy, reduce debt, and halve inflation. He went on to state that inflation would likely drop to 2.9% and the UK would avoid entering a technical recession this year. Next week the Bank of England will meet to decide on the policy rate, with a 50/50 split between the bank keeping rates unchanged and raising rates by 25 basis points before ending its current tightening cycle. USD/CAD trades around 1.37580. Data today for Canada showed that wholesale trade in Canada increased by 2.4% in January. The decision by the Bank of Canada to halt its rate hiking cycle along with concerns of a deeper global economic downturn could lead to undermining the Canadian dollar. West Texas Intermediate (WTI) crude oil trades around 67.950.
- EUR/USD: 1.0524 - 1.0628 ▲
- GBP/USD: 1.2018 - 1.2104 ▲
- AUD/USD: 0.6596 - 0.6662 ▲
- USD/CAD: 1.3726 - 1.3808 ▲