Home Daily Commentaries The US dollar is losing momentum with Powell dripping some dovishness

The US dollar is losing momentum with Powell dripping some dovishness

Daily Currency Update

The US dollar index continues in a slow slide after reaching an 18-month high last Monday, and the primary driver was Federal Reserve Chairman Jeremy Powell’s speech last night. He dripped some dovishness when he was talking about the endgame for rates instead of sticking to the shout of gradual rate normalization. In yesterday’s session, the retail sales advance was at a 0.8% vs. 0.5% read.

Key Movers

The Loonie started a rally by noon in yesterday’s trading session helped by a stronger crude price. It was not affected by existing home sales, which came in at -1.6 percent early yesterday. In the overnight session, the USD/CAD did not have too many swings and had a consolidation along with crude’s price strengthening.

The USD/CAD continues sliding this morning (stronger Loonie) after month to month manufacturing sales came in at 0.2 percent vs. 0.1 percent, which was better than expected. On top of that, the US index is falling by 0.5 percent this morning, helping the Loonie’s rally. (See the US dollar section for more details).

The EUR/USD is strong this morning, up 0.65% printing a price of 1.1398. One of the reason is the greenback has been losing momentum over the last four days and the Euro has managed to climb back above the critical 1.1300 level.

However, the main reasons were today’s EU inflation numbers, which came out without any revisions. The year to year CPI change remained at 2.2 percent, while the core gauge stayed at 1.1 percent. The ECB expects core inflation to rise significantly over the next quarters, according to Mario Draghi's words.

It was a miserable day for Sterling yesterday as chaos enveloped the Conservative party on the back of Prime Minister Theresa May’s EU withdrawal proposal, which is being approved by the cabinet. The Cable soon collapsed as a series of resignations hit the Conservative party.

The GBP/USD bottomed yesterday at 1.2724, right after Theresa May finished giving a press conference to save her Brexit plan amid resignations and opposition from Tory MPs. However, the Cable is increasing by around 1.2% from the lowest price yesterday to 1.2871 at this moment.

The Australian dollar received an unexpected boost yesterday and today on the back of much better-than-expected October employment data. According to the Australian Bureau of Statistics 32.8K new jobs were added in October, an increase of 42.3K full-time positions, as part-time jobs decreased by 9.5K. The unemployment rate remained steady at 5.0%, beating expectations of 5.1%, in spite of the participation rate surging to 65.6%.

The Kiwi continues to perform well, climbing further overnight to hit a 3-month high of 0.6845 against the USD as it continues to avoid the volatility seen elsewhere. The Kiwi has been resilient in the past few trading sessions, evading the negative headlines impacting other major currencies.
This climb follows several data releases that supported sustainable growth in the country, including GDP, CPI, and jobs. With the economic calendar looking quiet for the next two weeks, the focus is on the Brexit with expectations of further drama to unfurl.

Expected Ranges

  • USD/CAD: 1.3100 - 1.3200 ▼
  • EUR/USD: 1.1380 - 1.1425 ▲
  • GBP/USD: 1.2840 - 1.2890 ▲
  • AUD/USD: 0.7250 - 0.7361 ▲
  • NZD/USD: 0.6800 - 0.6860 ▲