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Dollar steady on quiet trading day

Daily Currency Update

Demand for the US dollar was marginally higher on Monday even as US markets were closed due to Independence Day. The US dollar ended the previous week on a high note as risk aversion returned to the market.

On Wednesday we will see the release of the Federal Open Market Committee (FOMC) Meeting Minutes which provides a detailed record of the FOMC’s most recent meeting, which will display the rationale behind announcing the latest 75-basis point interest rate hike. US non-farm payrolls, due on Friday,  is often a figure in focus. A preliminary estimate for job additions in June is 250k, extremely lower than the former additions of 390k in May, and it raises some concerns about how robust the US economy is during a time when its central bank is looking to increase its interest rates aggressively.

The US Dollar Index was up 0.06% at around 105.20 at the time of writing.


Key Movers

HICP (a measure of inflation) in the Eurozone has been in focus and reported at 8.6%, higher than estimates and the prior print of 8.4% and 8.1%. Similar to the inflation rate in the US economy, we are seeing inflation track continuously higher in the Eurozone and the European Central Bank is yet to act. In the last two weeks, the feeling in the market is that there could be a significant move from the European Central Bank with a potential rate hike announcement. We have seen a more hawkish approach in recent meetings compared to their historical stance of being relatively slow with rate hikes, and thus the euro could benefit in the coming weeks if this materializes into aggressive rate hikes. EURUSD down 0.04% trading at 1.0423 at the time of writing.

Economic data in the UK hasn’t been the most optimistic in the last few months which has put pressure on the pound. A recent survey from the British Chambers of Commerce (BCC) mentioned that 54% of more than 5,700 companies it surveyed between May 16 and June 9 expected turnover to increase over the next 12 months. This is down from 63% in the previous survey and the lowest share since late 2020 when many businesses were under some form of COVID-19 restrictions. Businesses are currently struggling with exponentially increasing costs in their supply chain, as well as a rise in energy costs, which is squeezing profit margins. This coupled with a reduction in spending from the average consumer is a double-edged sword for UK businesses and keeps the pound subdued for now. GBPUSD was up 0.12% trading at 1.2107 at the time of writing.

Expected Ranges

  • EUR/USD: 1.0419 - 1.046 ▼
  • GBP/USD: 1.2088 - 1.2158 ▲
  • AUD/USD: 0.6798 - 0.6886 ▲
  • USD/CAD: 1.2841 - 1.29 ▼