Home Daily Commentaries US dollar pulls back from multi-year highs

US dollar pulls back from multi-year highs

Daily Currency Update

Demand for the safe-haven US dollar eased slightly on Friday, pulling back from 20-year highs. Though the USD rally has paused, global equity markets look on course to finish the month sharply down. Typically, as the stock market falls, the USD gains strength. And as the market climbs, the USD falls. The US dollar has had a strong four-day streak against a basket of currencies, buoyed by expectations for aggressive rate hikes to curb inflation and safe haven flows from concerns over the global economic outlook due to supply constraints from the Russia-Ukraine crisis and China's lockdowns.

Preliminary data showed that Canada's economy extended its streak of monthly gains, giving more support for the Bank of Canada's plan for aggressive monetary tightening. Canadian GDP rose in March for its tenth straight month, climbing 0.5%. First-quarter growth showed a 5.6% annualized increase, beating most economist expectations. USDCAD was up 0.11% trading at 1.2818 at the time of writing.


Key Movers

A first estimate of Eurozone annual inflation showed an uptick to 7.5% in April, in line with expectations. Like in the UK, soaring inflation and a slowing economy means policy makers are facing a conundrum of how much they can raise rates without bringing growth to a standstill.

The other main factor the Eurozone is dealing with is the possibility of Russia turning off its gas supply to more countries. So far only Poland and Bulgaria have been affected (which each have their own currency) however should they decide to turn off German supplies then we could be looking at a huge economic shock which could tip the world’s 4th largest economy into recession. It appears some countries, including Italy, are prepared to pay in rubles. However the ongoing conflict in Ukraine and the potential further action from Vladimir Putin creates ongoing uncertainty for Europe and the wider world, despite today’s rally in stock markets.

EURUSD was up 0.42%, trading at 1.05428, while GBPUSD was up 0.94% at 1.2572 at the time of writing.

Expected Ranges

  • EUR/CAD: 1.3393 - 1.354 ▲
  • GBP/CAD: 1.593 - 1.6135 ▲
  • AUD/CAD: 0.9077 - 0.9139 ▼
  • USD/CAD: 1.2724 - 1.2824 ▲