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USD picks up steam ahead of Fed testimony

USD - United States Dollar

Demand for the US dollar picked up some steam this morning after losing ground against the AUD, CAD, NZD and GBP yesterday. The US Dollar Index was up 0.11%, trading at 92.00 at the time of writing.

USD strengthened against its major counterparts, including the pound and the euro, as market participants awaited testimony from Federal Reserve Chair Jerome Powell for further insight on last week’s surprise shift in the US Federal Reserve’s outlook. Powell is set to testify at 2 p.m. eastern. Powell is expected to address rising inflation pressures and other risks to the country’s economic outlook.

Key Movers

European Central Bank president Christine Lagarde gave an optimistic outlook of the economic health of the Eurozone, as the bloc continues to recover from the pandemic slowdown. ECB policymaker Mario Centeno also noted that all analyses indicate that the rising inflation in the Eurozone is temporary. The euro gained 0.41% against the US dollar on Monday, before dropping back to 1.90 today as investors await testimony from Federal Reserve Chair Jerome Powell.

GBPUSD fell below the 1.38 handle for the first time since April on Friday on the back of the shock Fed announcement. The pound rallied against the US dollar Monday, before falling in early morning trade today. GBPUSD was down 0.32% to 1.3892 at the time of writing.

It is likely the British currency is still being contained by the rising number of COVID cases. Italian ministers have weighed on the growing UK infection rate and have claimed that the EURO 2021 final should be held in Rome, rather than London.

A longer-term positive for sterling could come in the form of further trade negotiations. Britain is to start negotiating to join the Trans-Pacific Partnership. The trade agreement consists of 11 nations, including Australia, Canada and Japan. Establishing this would give the UK access to a reduced-tariff market of over 500 million people and will likely leave sterling trading much higher against its major peers.

The Australian dollar was down again after clawing its way back above 0.75 US cents on Monday. AUDUSD was down 0.44%, trading at 0.75050 at the time of writing. Investors are looking towards the Reserve Bank of Australia’s monthly meeting on July 6th for any hints of a shift in narrative in the RBA’s policy outlook.

Expected Ranges

EUR/USD: 1.1882 - 1.1921 ▼

GBP/USD: 1.3864 - 1.3936 ▼

AUD/USD: 0.7495 - 0.7544 ▼

USD/CAD: 1.2354 - 1.2403 ▲