Daily Currency Update

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Fiscal stimulus teasers weaken dollar

USD - United States Dollar

US legislators have been closer to a federal stimulus deal today than any time since rumors began in early September. The value of the US dollar slipped lower, as investors left US treasuries and went to equities.

The details of the $900 billion stimulus package have not been released. Headlines have revealed potential for individual and family checks and extended unemployment benefits. The relief could not come sooner to Americans and their business.

Over 885,000 people filed unemployment claims last week, more than the forecasted 817,000. Its negative for currency valuations when the forecast is less than the actual number of claims.

Manufacturing activity in the Philadelphia region continued to grow, but growth was less widespread, according to firms responding to the December Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments remained positive for the seventh consecutive month but fell notably from their readings in November.

Key Movers

The pound reached two-year highs against the US dollar overnight amidst broader dollar weakness and suggestions that a potential breakthrough on Brexit negotiations could come this weekend. Gains against the euro were more modest, confirming that the foreign exchange market remains guarded on the two sides failing to reach an agreement. Hopes for an end to Brexit negotiations before Friday were quashed late on Wednesday when the UK government announced the House of Commons would close for the Christmas period and MPs would only return should a Brexit deal be agreed with the EU.

The Australian dollar toyed with a break above resistance at 0.7575/0.7580 through trade on Wednesday amid a flood of major headlines and mixed macroeconomic indicators. Signs a US fiscal stimulus bill is imminent and renewed optimism a Brexit deal will be struck, coupled with a surprise uptick in manufacturing and service activity across Europe helped drive risk asset gains and push the AUD toward intraday highs at 0.7579. The AUD gapped lower immediately following the Federal Reserve and FOMC policy meeting as the Fed made no changes to its quantitative easing balance sheet. Some analysts expected further loosening of the monetary policy mandate prompting a short run AUD sell off, marking lows at 0.7540. Markets then quickly reversed the move as Federal Reserve Chairman Jerome Powell addressed reporters in a press conference following the meeting. Powell was quick to remind investors of the Fed’s dovish stance, adamant rates will remain flat through the foreseeable future. Recouping losses, the AUD jumped straight back to 0.7575 and buys 0.7571 at the time of writing.

Expected Ranges

EUR/USD: 1.213 - 1.225 ▼

GBP/USD: 1.345 - 1.362 ▼

AUD/USD: 0.754 - 0.763 ▼

USD/CAD: 1.269 - 1.278 ▼