Demand for USD falls across the board
Thursday 29 July, 2021
Daily Currency UpdateUSD - United States DollarDemand for the US dollar fell across the board after comments by US Federal Reserve chair Jerome Powell saying that the Fed was nowhere near an interest rate hike. Fed policymakers concluded a two-day meeting on Wednesday and held rates near zero, as expected. The US Dollar Index was down 0.39% this morning trading around 91.96. The central bank maintained its long term stance that inflation remained a transitory issue, saying that it would pass over time as the economy normalized and supply chain issues were resolved. The Fed also commented that though jobs growth and economy are strengthening, "risks to the economic outlook remain", adding that it would continue to monitor economic progress before easing pandemic support. Policymakers remain concerned that increasing interest rates too early will push up borrowing costs for businesses and consumers, which will reduce the ability for people to spend and businesses to grow. This naturally drove the US dollar weaker, having been buoyed in recent weeks on speculation that interest rates may be raised sooner than expected in the US.
Key MoversAfter two months of soaring COVID-19 cases in the UK, peaking at 54,674 on July 17th, numbers have been falling quite dramatically with just over 20,000 cases reported on Tuesday. This had been quite positive for the pound, providing support versus the euro and the US dollar. GBPUSD was up 0.53%, trading above 1.39 at the time of writing. The euro hit three-week highs on Thursday against a softening US dollar. In economic data, inflation in Germany came in higher than expected. German CPI rose to 3.8% from 2.2% on a yearly basis. EURUSD was up 0.35% at the time of writing.The Australian, New Zealand and Canadian dollars all benefited from a broadly weakening USD after the Fed comments. However, the Australian dollar’s gains were capped by concerns over extended COVID-19 lockdowns.
- EUR/USD: 1.1788 - 1.1888 ▲
- GBP/USD: 1.3864 - 1.398 ▲
- AUD/USD: 0.7327 - 0.7414 ▲
- USD/CAD: 1.2452 - 1.2592 ▼