Home Daily Commentaries The US dollar soars as a safe haven and follows robust housing data

The US dollar soars as a safe haven and follows robust housing data

Tuesday 20 September, 2022

Daily Currency Update

The US dollar index, DXY, is up 0.6%, and it is acting as a safe haven in today’s session as market participants increase their expectations following a total percentage point increase by Sweden’s central bank from 0.75% to 1.75%. The Nasdaq 100 and S&P 500 indices fell 1% and 1.4%, respectively. The Commerce Department reported that housing starts rose to 1,575k vs 1,404k in the prior month, versus an expected 1,450k. According to some specialists, the housing market might be holding up because of a lack of supply in the US.

Key Movers

In Germany, August producer prices increased +7.9% vs +2.4% expected, which is the highest monthly increase following an increase in July due to a rise in energy prices. However, the Euro was under pressure following a report that Russia may look to annex parts of the Ukraine. The EURUSD pair trades between 0.9955 and 1.0051 today. According to Bloomberg, European Central Bank President Christine Lagarde said borrowing costs will rise more in the months ahead, even after officials front-loaded initial moves in what she called, “...the fastest change in rates in our history.” In APAC countries, Japanese inflation came in on the upside as well. The Bank of Japan policy meeting is this week; the statement is due on Thursday, 22 September. The USDJPY pair trades between 142.94 and 143.92 at the time of this writing. People’s Bank of China’s setting of the 1- and 5-year Loan Prime Rates (LPR) came in as expected at 3.65% and 4.3% for 1 and 5-year loan prime rates, respectively. These remain unchanged, as was widely forecast. In Australia, the Aussie dollar trades weaker today, between 0.6677 and 0.6746. Early today, bond yields in Australia declined after minutes from the RBA’s September meeting showed the central bank is getting closer to “normal settings”, which might mean that the Reserve bank of Australia won't increase overnight rates as much as its counterparties such as the Fed in the US or the BoC in Canada. The unexpected rise in the August unemployment rate in Australia supports the idea that the RBA might not be so hawkish after all. If the RBA delivers a 5th consecutive 50 bps increase, the expectation is that it might be one of the last in this hiking cycle.

Expected Ranges

  • EUR/USD: 0.9960 - 1.0049 ▼
  • GBP/USD: 1.1360 - 1.1459 ▼
  • AUD/USD: 0.6677 - 0.6744 ▼
  • USD/CAD: 1.3229 - 1.3373 ▲