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USD losses continue

Daily Currency Update

The US Dollar Index (DXY) is down close to 1% this morning, sitting just over 101 on the index.  The USD is struggling at the start of 2023 as markets price in a less aggressive Federal Reserve and US bond yields fall.  Additionally, equities markets are seeing early year rallies and commodities are gaining, taking strength out of US Treasuries with WTI oil reaching over $82 a barrel.  On the data front, producers in the US paid less last month with the PPI release falling to -0.5% versus the expectations of -0.1%.  Retail sales also fell more than expected in December seeing a -1.1% drop rather than the -0.8% that economists predicted.

Key Movers

The Euro’s stance against the USD continue to improve as markets process encouraging inflation numbers from the US. American inflation is falling towards the Fed’s 2% target with the most recent CPI coming in just over 6%.  In Europe on the other hand, inflation continues to track close to 10%, raising expectations that the ECB will need to crank up the rate hikes as the US Federal reserve takes its foot off the gas.

Inflation continues to be an issue in the UK shown through the overnights release of 10.5% headline inflation and 6.3% core CPI.  Both rates were higher than expected so markets are looking to the BoE to hike interest rates even further.

The Canadian dollar is making gains against its US counterpart as oil rises and equities continue to rally. West Texas oil is up over $82 a barrel and all the North American Markets are up today, giving support to the risk-positive dollar.  With yesterday’s CPI release being the only significant Canadian data this week, the Canadian dollar will likely follow more general market trends.

Expected Ranges

  • EUR/USD: 1.0768 - 1.0879 ▲
  • GBP/USD: 1.2249 - 1.2428 ▲
  • AUD/USD: 0.6968 - 0.7055 ▲
  • USD/CAD: 1.3354 - 1.3406 ▼