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USD gains across the board

Daily Currency Update

USD - United States Dollar

The US dollar continued its upward climb versus other major currencies as rising energy prices fuelled concerns over rising inflation. The US Dollar Index was up 0.45%, trading at 94.39 at the time of writing.

Early in the week oil prices rose to a seven-year high, adding to inflationary pressures that drove some investors to the safe-haven status of the US dollar. However, oil posted losses on Wednesday after a report showed crude stockpiles rose more than expected and after Russia said it would help stabilize global energy markets.

All eyes are now on Friday’s non-farm payroll data, and it will be this that could drive the US dollar's next move. A strong result here could suggest that the Federal Reserve has support to start normalizing its monetary policy, by tapering its asset purchase program and hiking interest rates. A much weaker than expected reading however could suggest that any move from the Federal Reserve could be deemed as too soon, as the economy still needs time to recover from the pandemic.

Key Movers

The euro broke below 1.16 against the dollar on Wednesday after being the biggest loser the previous day. Rising breakeven inflation rates, concerns surrounding a looming energy crisis and a widening in real German-US yield spread have all come together to dampen demand for the single unit. With the gap in monetary policy expected to widen and real near-term challenges threatening the broader economic recovery, we expect further downward pressure on the EUR through the end of the year. EURUSD was down 0.48%, trading at 1.1537 at the time of writing.

The UK's inflation rate hit 3.2% in August, significantly higher than the Bank of England's target of 2%. The question remains whether this rise is a short term phenomenon as a result of post COVID-19 and Brexit supply chain issues, or a longer term concern. As such, the market remains unsure about the Bank of England's next move, with some investors suggesting the Bank of England may even increase rates as early as November. GBPUSD trended lower on Wednesday morning, trading around 1.3556 at the time of writing. This suggests the market remains highly uncertain about the Bank of England's next move.

Expected Ranges

  • EUR/USD: 1.153 - 1.161 ▼
  • GBP/USD: 1.355 - 1.3643 ▼
  • AUD/USD: 0.7228 - 0.73 ▼
  • USD/CAD: 1.2562 - 1.2646 ▲