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Dollar retraces as US yields decline

Thursday 20 January, 2022

Daily Currency Update

The decline in global equities has abated over the last 12 hours and both GBP/USD and EUR/USD have traded narrow ranges, albeit close to their weekly lows.  But overall, the USD is a touch softer this morning, this following a retracement in US treasury yields yesterday. Investors shrugged off the high UK inflation print yesterday - this the highest reading in almost 30 years - as it was more-or-less in line with expectations.  There wasn’t much of a reaction to Bank of England Governor Bailey’s testimony to the Treasury Select Committee yesterday, either.  He referenced the tightness in the labour market and the pressure that energy supply and other supply chain issues are having on inflation and the inflation outlook.  It didn’t change the minds of investors – the market is already predicting interest rates to go one way.

Key Movers

In other news, the AUD rallied overnight following a strong labour market report.  Some local banks brought forward their expectations for an RBA rate hike on the back of the strong reading – we saw AUD/USD push up through the .72 figure again and GBP/AUD has settled back below 1.89.  NZD followed suit. Looking ahead to today, the ECB is due to publish its record of its most recent monetary policy meeting, which should be interesting considering this morning’s high inflation print from the Eurozone.  There’s a smattering of data due from the U.S. this afternoon, too, including Philly Fed Manufacturing and Existing Home Sales.

Expected Ranges

  • GBP/USD: 1.3580 - 1.3660 ▲
  • GBP/EUR: 1.1950 - 1.2040 ▲
  • GBP/AUD: 1.8780 - 1.9000 ▲
  • EUR/USD: 1.1290 - 1.1400 ▲