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USD maintains broad strength

Tuesday 19 April, 2022

Daily Currency Update

The US dollar tested a two-year high against the euro and climbed to a new 20-year high against the Japanese yen on Tuesday on the back of expectations for a 50-basis point interest rate hike by the US Federal Reserve. Bond yields have risen sharply over the last 2 weeks as markets price in a significant monetary policy tightening following a sustained string of hawkish commentary from key central bank officials.

New York Fed John Williams, who is typically aligned with the Fed and FOMC chair Jerome Powell, fueled speculation a faster tightening is on the table suggesting a 50-basis point hike was “a very reasonable option”. His comments all but guarantee the Fed will accelerate the pace of rate hikes next month, highlighting the growing gap between the Fed and other major central banks. The US Dollar Index was up 0.22% sitting at 101.00 at the time of writing.

Key Movers

The euro held firm against a broadly strong US dollar on Tuesday. The European Central Bank indicated at its latest policy meeting that it would adhere to its earlier guidance for a steady withdrawal of stimulus, saying that recent economic data did “reinforce its expectation” that its asset purchases should end in the third quarter. The ECB also held off from raising interest rates last week. However they have hinted that we may see hikes as early as Q3 2022, which could provide the EUR with much needed support. EURUSD was up 0.15%, sitting around 1.07930 at the time of writing.  

Expected Ranges

  • EUR/USD: 1.0764 - 1.0809 ▲
  • GBP/USD: 1.2984 - 1.3037 ▼
  • AUD/USD: 0.7345 - 0.7395 ▲
  • USD/CAD: 1.2571 - 1.264 ▲