US dollar breaks its winning streak
Wednesday 3 May, 2023
Daily Currency UpdateThe US Dollar Index decreased today to the 101.41 range, shredding its three-day gains earlier this week. The green back is under constant selling pressure in negative territory ahead of the Federal Open Market Committee (FOMC) decision. The Fed stated that it may pause the hiking cycle, which in turn could lead to further decline in the US dollar. The Fed has been on a hiking spree to curb inflation since March 2022 which elevated the rates from a near zero level to the range of 4.75% to 5% within just 1 year.
The Fed is expected to hike rates by 25 basis points (bps) which may be the final hike this year. The banking crisis in the United States may make the Fed rethink its hawkish monetary policy stance even though inflation is still higher than Fed's target 2%. Inflation currently stands at 5%. US treasury’s benchmark 10-year notes decreased and were down 6.4 bps to near 3.37%, from 3.43% a closing yesterday.
The S&P Global services sector Purchasing Managers Index (PMI) increased from a reading of 52.6 for March to 53.6 in April. The data published by Automatic Data Processing (ADP) indicated that the private sector employment in the US grew by 296,000 in April, beating the market expectation, for an increase of 148,000, by an expansive margin.
Key MoversEurozone markets have rebounded modestly following Tuesday’s negative levels, trading near 1.100. This is amid market attention pointed to the Fed’s policy rate announcement and tomorrow’s European Central Bank’s (ECB) meeting. Both European and US central banks are in the same boat dealing with a sluggish economy, soaring inflation, unimpressive unemployment rates, and an unsteady banking sector.
The sterling followed the same path as its European peer and was seen recovering against the USD at the 1.2500 levels. The tone of the market was similar too, focusing on the Fed decision. Support aiding the GBP came from aa Nationwide (UK’s biggest mortgage lender) data release where it shared a 0.5% month-over-month rise in UK housing prices in April when a negative figure had been expected.
Crude oil prices remain weak today after dropping 5.5% drop yesterday. This decrease was mainly driven by two factors, uncertainty around the expected interest rate hike and demand worries across the globe. Oil prices remain in negative territory and were seen hitting a fresh low since March 27, 2023.
- EUR/USD: 1.0998 - 1.1058 ▲
- GBP/USD: 1.2466 - 1.2554 ▲
- AUD/USD: 0.6654 - 0.6681 ▲
- USD/CAD: 1.3599 - 1.3638 ▼