Home Daily Commentaries USD reverses gains on bond yield slide and oil forecast

USD reverses gains on bond yield slide and oil forecast

Tuesday 1 November, 2022

Daily Currency Update

The US dollar gave up the gains it made against the basket of other major currencies in the overnight markets. Oil prices came back up to $88 a barrel after a more positive than expected manufacturing release from China drove hopes that things are close to “getting back to normal.”  Yields on USD bonds were also down in Asian markets as traders prepare for tomorrow’s FOMA interest rate announcement.  Markets are expecting a full 75-point hike but are hoping a less hawkish tone in the press release and new conference.  This would signal a less aggressive hiking strategy going forward.

Key Movers

Both the GBP and the Euro are trading up against the USD in early morning session but not significantly.  With both the UK and the Eurozone facing inflation levels around 10%, further aggressive hikes from both the BoE and ECB are expected. The Japanese yen made slight gains as well in Asian markets.  The JPY seems to be calming down recent volatility on Tokyo’s recent $43B intervention to stabilize the currency. The Reserve Bank of Australia surprised markets with a second straight smaller than expected rate hike, moving their cash rate up by 0.25% to 2.85%.  Before this announcement, the AUD had joined other majors in making gains against the USD. However, these were largely erased after the RBA press release. The Canadian dollar has regained all the loses it had against the USD over the last 3 sessions as oil begins to make another move towards $90 a barrel and North American Equities markets trade higher heading into the open.  Oil is over $89 a barrel, up from $34 yesterday.  Dow futures are up over 200 points, signaling further risk appetite heading into year end.

Expected Ranges

  • EUR/USD: 0.9875 - 0.9950 ▲
  • GBP/USD: 1.1462 - 1.1562 ▲
  • AUD/USD: 0.6371 - 0.6463 ▲
  • USD/CAD: 1.3531 - 1.3671 ▼