The US dollar falls for a second consecutive day, despite hawkish remarks from Fed officials and high volatility in equity markets
Thursday 29 September, 2022
Daily Currency UpdateAccording to Labour Department data, US initial jobless claims decreased by 16,000 to 193,000 during the week ending on September 24th. This is a five-month low and implies a strong demand for workers, despite economic uncertainty. Usually, having an 'actual' less than the 'forecast' initial claims numbers is good for the US dollar; however, after seemingly unstoppable US dollar strength over the last few days, it fell today. The US dollar index DXY fell 0.53%, and the Pound and Euro beat the US dollar by 1.67% and 0.66% at the time of this writing. Cleveland Fed President Loretta Mester said achieving price stability is the Fed's most important goal. When she was asked if a recession would change her mind about raising interest rates, she said, "We've got to get to price stability. So we're going to do what we have to do to get the price stability. So — no". Equity markets fell heavily (S&P500 -2.7% and Nasdaq 100 -3.25%), and the S&P 500 fell to a 22-month low, reversing yesterday's rally. The interesting observation is that the US dollar failed to increase, despite negative sentiment in the financial markets.
Key MoversAccording to Statistics Canada, gross domestic product increased in July by 0.1%, beating estimates for a -0.1% drop. Robust Canadian economic activity would generally urge the Fed to further increase rates, however CAD fell in today’s session. The Bank of England rescued the bond market in the UK (UK's Gilt market). Today, the GBP has been firmly up since the early session in North America. It may have been helped by short-covering (the Pound is heavily shorted). The EURUSD pair also increased following comments from ECB Governing Council member Gediminas Simkus, who said he would support a three-quarter-point interest rate increase in the next few months. Commodity currencies such as the Canadian dollar, Australian dollar, and Kiwi dollar remain on the back foot amid increases in interest rates of treasury yields.
- EUR/USD: 0.9639 - 0.9810 ▲
- GBP/USD: 1.0767 - 1.1090 ▲
- AUD/USD: 0.6448 - 0.6524 ▲
- USD/CAD: 1.3605 - 1.3755 ▼