Home Daily Commentaries Demand for USD continues to fall

Demand for USD continues to fall

Daily Currency Update

Demand for the US dollar kept falling on Thursday, driving gains across other major currencies like the euro and the pound. US CPI inflation surprised to the downside yesterday – missing conservative estimates by 0.2% – which helped propel gains across the S&P 500 and Nasdaq while forcing the USD lower.

While the correction in price pressures is a welcome relief to consumers and central bank officials, core measures of inflation remain well above target. US Federal Reserve policymakers have made it clear they need to see a sustained improvement in inflation outcomes before pivoting  away from its current program of monetary policy adjustment. While the door is open for a 50-point hike next month we anticipate the Fed will continue raising rates at pace through the near term. With the jobs market stubbornly strong, we expect the Fed will continue with a more aggressive approach, squashing inflation and then unwinding gains to drive a recovery out of recession in 2023. The market will be payOur attentions turn now to us PPI data and jobless claims, while we expect little impact they could help provide further colour as to labour market strength and the evolving inflation environment.

The US Dollar Index was trading at 104.96 at the time of writing.

Key Movers

Elsewhere, the economic calendar has been quiet but Friday's UK GDP data is in focus. Expectations are for a weaker negative figure, supporting comments from the head of the Bank of England, Andrew Bailey, that the UK could be heading into a long and dark five-quarter recession. This could be potentially damaging for the pound medium term, but for now, there isn’t anything particular driving GBPUSD other than the broadly softer US dollar. GBPUSD  to drive the currency in either direction. GBPUSD was trading at 1.222 at the time of writing.

The Canadian dollar rose against the US dollar on the back of data pointing to easing US inflation and higher oil prices on Thursday. The price of oil advanced after the International Energy Agency boosted its forecast for global demand growth this year. USDCAD fell to a two-month low, trading around 1.27401 at the time of writing. 

Expected Ranges

  • EUR/USD: 1.0277 - 1.0361 ▲
  • GBP/USD: 1.2184 - 1.2259 ▲
  • AUD/USD: 0.7065 - 0.7134 ▲
  • USD/CAD: 1.2734 - 1.2792 ▼