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US dollar scales 20-year highs

Tuesday 14 June, 2022

Daily Currency Update

Demand for the US dollar kept going higher on Tuesday as the market awaited the US Federal Reserve's interest rate policy decision on Wednesday. Investors continued the flight away from equities and commodities and into safe-haven assets like the US dollar amid fears aggressive central bank re-adjustments and sustained inflation pressures will plunge the global economy into recession. The US Dollar Index extended beyond 1.05 Monday, marking fresh highs, while the yen enjoyed support against all other majors. The surge in global rates has seen the USD extend recent gains against the yen, pushing through 135 to mark a 24-year high at 135.19. The Bank of Japan Governor finally succumb to pressures and admitted the recent collapse in the yen was bad for the local economy yet refused to be drawn on adjusting the current policy stance suggesting monetary easing was still necessary. Having acknowledged the recent collapse in the yen is an issue, there is some scope to suggest the yen may find support. But with markets enveloped by this surge in global rates we expect the USD will continue to test new heights. The US Dollar Index was sitting around 105.40 at the time of writing.    

Key Movers

The pound struggled against the dollar and the euro on Tuesday amid concerns around a new Brexit trade war with the European Union and the possibility of a new Scottish independence vote. GBPEUR was down 1.09% trading around 1.528 while GBPUSD was down 1.05% around 1.2006 at the time of writing. With the UK economy already battling generational inflationary pressures and lackluster growth another trade war could well see the GBP sink below 1.20. The euro failed to escape the risk off shift, staying below 1.05 on Tuesday. The threat of another trade spat with the UK and weaker than anticipated domestic economic data weighed on the single currency through the start of the week. With the European Central Bank now committing to normalize monetary policy, we do expect the euro will find support on moves approaching year to date lows. That said, if the ECB fails to keep pace with the Fed and the policy gap continues to widen a break nearer parity is not off the table. EURUSD was up 0.04% trading at 1.0414 at the time of writing.  

Expected Ranges

  • EUR/USD: 1.0404 - 1.0474 ▲
  • GBP/USD: 1.2001 - 1.2196 ▼
  • AUD/USD: 0.6877 - 0.6966 ▼
  • USD/CAD: 1.2842 - 1.2939 ▲