Home Daily Commentaries US sales of new homes unexpectedly rose in the US, pushing the US dollar index close to a new 20-year high again

US sales of new homes unexpectedly rose in the US, pushing the US dollar index close to a new 20-year high again

Tuesday 27 September, 2022

Daily Currency Update

Positive US data surprised the fx markets pushing the US dollar higher and the stock market slightly higher as well. The sale of new homes rose in the US in August which was good news for the US economy; however, it remains at risk of deterioration as mortgage rates are increasing rapidly. Furthermore, there were headlines where European gas jumped 19% on the risk Russia may sanction Naftogaz (the largest national oil and gas company in Ukraine), according to Bloomberg. This news helped the US dollar to hold gains in the North American session. What prevented USD soaring further was Chicago Fed President Charles Evans saying he's "optimistic" that the Fed's forecast rate path will be enough to reduce inflation. However, Fed Minneapolis President Neel Kashkari said the US central bank is committed to restoring price stability, and its current pace of interest-rate increases is appropriate. It is an extraordinary time for the US dollar. This morning the Aussie dollar hit a 28 month low against the USD at 0.6414. The same happened with the CADUSD when the Canadian dollar fell to a 28-month low against the USD yesterday, trading at 0.7242 (USDCAD: 1.3808). The Euro vs USD also hit 20 year and 3-month low yesterday, trading at 0.9554. The GBPUSD hit an all-time low last Sunday, trading at 1.0350.

Key Movers

According to Ray Dalio, founder and co-chief investment officer of Bridgewater Associates, the panic selling we are now seeing that are leading to the plunge of the British Pound makes people want to get out of the debt and currency. He mentioned that he couldn't understand how those behind this move didn't understand that. He added, "It suggests incompetence. Mechanistically, the UK government is operating like the government of an emerging country; it is producing too much debt in a currency that there is not a big world demand for."

Expected Ranges

  • EUR/USD: 0.9573 - 0.9667 ▼
  • GBP/USD: 1.066 - 1.0836 ▲
  • AUD/USD: 0.6416 - 0.6511 ▼
  • USD/CAD: 1.3644 - 1.3769 ▼