Daily Currency Update

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Inflation concerns drive market movement

USD - United States Dollar

Yesterday’s higher than expected Consumer Price Index drove bond yields higher and investors away from equities this morning. The US dollar rose slightly above two-month lows yesterday. Investors anticipate that higher inflation could force the US Federal Reserve to tighten monetary policy sooner than planned.

The US Dollar Index, which measures USD demand against a basket of major currencies, was up 0.3% at 90.710 this morning.

US weekly jobless claims dropped more than expected to a new pandemic low. The drop indicates the labor market is slightly improving, despite a slowdown in hiring last month. Around 473,000 initial jobless claims were filed last week, down from 507,000 in the previous week.

Key Movers

The euro held steady against the pound yesterday despite a stronger US dollar, after the European Commission raised its growth forecasts for the bloc. EURUSD was up 0.1% at 1.207 this morning. The eurozone economy is expected to expand by 4.3% this year, which is revised up significantly from 3.8% growth previously forecasted.

The Australian dollar extended its losses today following the mammoth increase in US inflation data. AUDUSD was down 0.2% at 0.7707 in early trading. Should prices continue to rise prompting a monetary policy amendment by the US Federal Reserve, the outlook for the AUD could begin to turn bearish. We continue to watch inflation markers as the key driver of currency market direction.

Expected Ranges

EUR/USD: 1.205 - 1.210 ▲

GBP/USD: 1.400 - 1.411 ▲

AUD/USD: 0.769 - 0.777 ▲

USD/CAD: 1.206 - 1.215 ▼