US dollar falls back into negative territory
Wednesday 26 April, 2023
Daily Currency UpdateFollowing a brief recovery on Tuesday, the US dollar has once again fallen into negative territory with the dollar index (DXY) trading near 101.050. The dollar's attractiveness as a safe-haven asset seems to be diminishing due to an increasingly optimistic market sentiment because of positive earnings reports from big tech names like Microsoft and Alphabet. The Federal Reserve is poised to deliver another 25 basis point (bps) rate hike next week as inflationary pressures continue to build, implying that the current tightening cycle has not peaked. Nevertheless, money markets are predicting that US interest rates will peak in June and then fall to below 4.5% by the end of the year. First-quarter GDP data coming out tomorrow will give investors more insight into the current state of the economy. Data released today by the US Census Bureau revealed there was a significant increase in durable goods orders in March. The total value of orders rose by $8.6 billion, or 3.2%, reaching $276.4 billion. This growth was particularly noteworthy as it followed a contraction of 1.2% in February and it exceeded market expectations for a 0.8% increase.
Key MoversThe euro regained its position against the US dollar trading near 1.10900. Following the turbulence in the market on Tuesday, which saw the EUR/USD pair experience a sudden drop of over 100 pips due to a surge in USD strength, the pair has now stabilized. It is widely believed that the drop was driven by safe-haven flows resulting from concerns over a possible US recession and banking issues.
The sterling is trading higher against the dollar at 1.2471 today, as traders reduced their holdings of safe assets in response to concerns about US banks that led to a rush towards safety the previous day. According to traders, there is a 92% probability of a 25 bps increase in interest rates by the Bank of England (BoE) during its upcoming meeting scheduled for May 11th. The BoE has hiked rates eleven times since the beginning of this rate hiking cycle starting in December 2021.
USD/CAD experienced a bullish consolidation phase and remained within a tight trading range during the first half of the European session. Presently, the pair is positioned in a neutral area at approximately 1.3620, slightly below the almost one-month high achieved the previous day. The positive momentum of crude oil prices continues, partially reversing the downward trend yesterday. This shift comes as reports reveal that US fuel inventories are decreasing, indicating strong demand from the world's largest consumer of oil. As a result, this supports the commodity-linked Loonie and challenges the USD/CAD pair due to selling pressure on the US dollar. Crude oil prices trade near 76.800 a barrel.
- EUR/USD: 1.0965 - 1.1086 ▲
- GBP/USD: 1.2394 - 1.2498 ▲
- AUD/USD: 0.6596 - 0.6637 ▲
- USD/CAD: 1.3611 - 1.3646 ▼