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USD Driving Higher on Hawkish Fedspeak

Daily Currency Update

The USD touched fresh highs overnight against most majors.  This after St. Louis Federal Reserve President James Bullard reinforced hawkish already on display from other governors of the central bank.  He reminded investors that “there is a lot of tightening in the pipeline”.  This caused the US 10 treasury bond to break through 4% returns for the first time in 15 years.

Data-wise this morning, the US showed that it imported les last month with the balance of trade deficit coming it at -$87.3B. This was an improvement over the -$90B we saw last month.  Still to come are the pending home sales for August and the weekly US oil inventories.

Key Movers

The Euro fell to a fresh 20 year low against the dollar in the overnight markets.  The European currency continues to come under pressure with the potential sabotage of 3 Russian gas pipelines. This has led to prices of natural gas rising substantially moving into the cooler seasons.

The GBP has trimmed off small gains made on Monday in the European session as the Bank of England announced a plan to but long dated government bonds in an effort to calm markets.  This has caused the Pound to fall against the USD as the strategy contradicts the tax cut strategy being put in place by the British government.

In the APAC region, the Yen made marginal gains against the USD after the minutes of the latest BoJ meeting were released.  Indications were that the bank is concerned about rising inflation.  The Aussie Dollar lost some ground overnight as well as the RBA moves to decelerate its rate hikes.  This contrasts with an accelerated program from the Fed, putting the Australian Currency on the back foot.

In Canada, the CAD lost ground briefly in the overnights but is picking up ground as stock markets and oil prices regain strength this morning.  The WTI benchmark oil price has gained $4 a barrel from yesterday’s lows and all the North American stock indices are up. With a lack of Canadian data this week, the currency will likely follow general market risk-on vs risk-off trends.

Expected Ranges

  • EUR/USD: 0.9544 - 0.9631 ▼
  • GBP/USD: 1.0565 - 1.0791 ▼
  • AUD/USD: 0.6367 - 0.6469 ▼
  • USD/CAD: 1.3668 - 1.3827 ▼