Demand for USD hits four-month low
Friday 21 May, 2021
Daily Currency UpdateUSD - United States DollarDemand for the US dollar hit a four-month low in early morning trading, erasing any gains made yesterday after the Federal Reserve’s meeting minutes hinted at the possibility of paring back stimulus. The US Dollar Index was slightly up 0.1% to 89.96 at the time of writing.Investors initially viewed the suggestion of tapering from the Fed minutes as an indication rate rises might come earlier than previously thought, which bumped up demand for USD briefly. Federal Reserve member Robert Kaplan has suggested that slow and steady is still the best way to manage the US economy recovery, and that tapering is still not necessary. Yesterday, the Philly Fed Manufacturing Index came in at 31.5, down from 50.1 in April. The reading suggests a monthly contraction in the US economy, which also knocked USD down.
Key Moversurozone business growth accelerated at its fastest pace in over three years this month. The IHS Markit’s Composite Purchasing Managers’ Index rose to 56.9 points from April’s 53.8. The survey is usually seen as a good measure of economic health. EURUSD was down modestly 0.4% at 1.2177 this morning after remarks by European Central Bank president Christine Lagarde on inflation. Her comments, which are in line with the US Federal Reserve’s stance, indicates that the ECB believes inflation rise this year is temporary. The pound has been trading sideways for a large part of the week, however saw a slight lift on the back of stronger than anticipated retail data, suggesting areas of the economy are recovering far quicker than predicted. PMI data released today showed private UK business activity saw a record high, climbing to 62 points in May from 60.7 in April. GBPUSD broke the 1.42 handle in early trading before retracing back towards the mid 1.41 range.
- EUR/USD: 1.217 - 1.223 ▼
- GBP/USD: 1.415 - 1.423 ▼
- AUD/USD: 0.773 - 0.778 ▼
- USD/CAD: 1.202 - 1.209 ▼