Home Daily Commentaries The US dollar index hit a new 20-and-a-half year high, trading at 114.53

The US dollar index hit a new 20-and-a-half year high, trading at 114.53

Daily Currency Update

The US dollar was king last week, and it continues to outperform all G10 currencies, beating the British pound, Canadian dollar, Australian dollar, and Euro by 1.57%, 1.12%, 1.06%, and 0.75% respectively at the time of this writing. There was a risk-off environment last week, which continues today, with the most important North American global equity  indices in red territory.

The US dollar strength was driven to a new record high ahead of FOMC speaking schedule this week. According to Bloomberg, Federal Reserve Bank of Boston President Susan Collins, in her first public speech, said additional tightening is needed to control high inflation and cautioned the process would require job losses.

US Treasury yields climbed with the 10-year rate up about 19 basis points to 3.88%. 

USDCAD increased to a 28-month high (weak USD), to 1.3808 earlier today; however, it has since moderated and is trading at 1.3735 (a 1.1% increase) at the time of this writing.

Key Movers

The British pound was over 5% down versus the US dollar in the Asian session and hit a new record low between 1.0300 and 1.0350. In the Asian session, there was probably a liquidity issue, with high volumes moving the GBPUSD down by over 5%.

The British pound got some help in the North American trading session when Bank of England (BoE) Governor Andrew Bailey said that the bank is monitoring developments in financial markets and is closely watching the FX market. The BoE said it wouldn’t hesitate to change interest rates by as much as needed to return inflation to the 2% target. The BoE also said it would fully assess the government’s budget plans and the British pound's latest slump at its next meeting in November.

Today is a terrible day for UK assets, which coincidentally matches hawkish expectations for the BoE.

According to Bloomberg's “world interest rate probability”, the Bank of England may increase rates by ~ 150 bps in their November 3rd meeting.

In Europe, Giorgia Meloni won yesterday's Italian election, as was widely expected. It is difficult to say how much of the EURUSD move to the downside towards a new record low of 0.9554 is from the British pound selloff and how much is related to the election results in Italy.

A strong U.S. dollar seems to be the most common problem. The People’s Bank of China stepped up its support for the Yuan, the Bank of Japan defended its intervention in defense of the Yen, and every major currency in the world traded lower against the USD today.

Expected Ranges

  • EUR/USD: 0.9588 - 0.9702 ▼
  • GBP/USD: 1.0330 - 1.0911 ▼
  • AUD/USD: 0.6439 - 0.6535 ▼
  • USD/CAD: 1.3569 - 1.3808 ▲