Market Rebound, Drop in bond yields weighing on the USD
Tuesday 4 October, 2022
Daily Currency UpdateA trading rally to start the fourth quarter yesterday has continued to place downward pressure on the USD versus most majors. The world’s biggest currency lost has lost against Euro, Pound, and CAD overnight. In addition, concerns are emerging that the Fed might be raising rates too far, too fast.
The Dow has opened this morning over 30,000 points for the first time in over a week and US treasuries are being sold off as investors begin a late year trading rally. With a lack of data today, the US focus will be on a series of speeches from various Fed governors. Markets will be looking for any change to the hawkish tone in recent comments.
Key MoversThe Yen continues to underperform the USD after the Bank of Japan interceded into currency markets last week. This move has put the Yen under pressure. The other APAC currency under pressure against the USD is the AUD. The Royal Bank of Australia surprised markets overnight but hiking their interest rate by 0.25% opposed to the 0.50% that the markets were expecting. The move caused the AUD to give back about a cent of the gains it made yesterday.
The Euro continues to pick up ground on the USD on a softer dollar. This, combined with a recovering Pound is bringing positive sentiment back to the continent. The currency has etched back over a Par level with the American.
In the aftermath of the British government’s announcement that they are reversing a controversial tax plan, the GBP is on the rise. The Pound has taken back all the loses it has taken since the release of newly minted PM Liz Truss’ first “mini-budget”. The focus is now turning to the mechanisms that the Bank of England will be putting in place to deal with inflation.
The CAD has maintained the movement we saw yesterday with significant gains against the USD. The Canadian is being driven by the risk-on rebound in markets as well as a recovering price on oil. Oil has been moving up with the benchmark WTI price coming in around $85 a barrel this morning. Expectations are the oil could get a boost with an OPE+ meeting this week. Speculation is that the group could cut production by as much as 1 Million barrels per day. This could drive prices back towards the September high of $90 a barrel.
- EUR/USD: 0.9793 - 0.9948 ▲
- GBP/USD: 1.1263 - 1.1412 ▲
- AUD/USD: 0.6455 - 0.6543 ▼
- USD/CAD: 1.3574 - 1.3671 ▼