Home Daily Commentaries USD sustains strength against major counterparts

USD sustains strength against major counterparts

Daily Currency Update

The US dollar continued to see strength against its major counterparts on Monday, sitting at two-year highs as the currency continued to benefit from safe haven flows. The US dollar has been climbing since last week, fueled by commentary by central bank policymakers who have strengthened market expectations for a 50-basis-point rate hike in May to help curb rampant inflation.

Today, news around growing concerns of an economic slowdown in China helped boost USD's safe-haven status. Some market participants and analysts are worried that China's COVID-19 lockdowns will weigh on the global economic recovery as the country continues to pursue a COVID Zero strategy. Oil dropped today on concerns that a spreading COVID-19 outbreak in large cities like Beijing and Shanghai will impact consumption even further.

The US Dollar Index was up 0.47%, sitting at 101.69 at the time of writing.


Key Movers

The euro and the pound struggled against the US dollar on Monday morning.

The French Presidential Election was won by Macron with exit polls showing that Emmanuel Macron won with around 58% of the votes. This news has done little to support the EUR against the USD. Speculations over the tightening of the US Federal Reserve’s monetary policy intensified sharply last week after optimistic comments from policymakers. Markets are now pricing in a near 70% chance of a potential interest rate increase to 1.50-1.75% by the end of the first half of 2022. EURUSD was down 0.77% sitting at 1.07125 at the time of writing.

GBPUSD broke below the 1.29 handle before the weekend break and has since further declined on Monday morning – just holding above 1.2700, which are levels not seen since September 2020. Friday’s decline may have been due to market sentiment and worse than expected UK economic data. Investors could be looking for more news today regarding Boris Johnson and how he may be forced to resign once the findings of Sue Gray’s review of lockdown-breaching parties in Whitehall are revealed. The Prime Minister was present in at least 12 events at No 10 and fined for the celebration of his 56th birthday held in the cabinet room. Political uncertainty can mount pressure on the pound. GBPUSD was down 0.90%, trading at 1.2719 at the time of writing.

Expected Ranges

  • EUR/USD: 1.0702 - 1.0814 ▼
  • GBP/USD: 1.2698 - 1.2854 ▼
  • AUD/USD: 0.714 - 0.7258 ▼
  • USD/CAD: 1.2709 - 1.2776 ▲