The US Dollar (USD) surged higher yesterday after the ISM non-manufacturing PMI beat forecasts, surprising markets by rising from 54.4 to 56.5.
Alongside the improvement in service sector activity, US factory orders grew by 1% in October, above expectations of a 0.7% rise. Both releases indicate a strong US economy.
Turning to today, notable US data is thin on the ground. As a result, risk appetite could drive movement in the safe-haven American currency.
The Pound (GBP) traded without a clear directional bias yesterday as the UK’s final services PMI printed in line with expectations.
The lack of trading impetus left Sterling to move in relation to the global market mood, with GBP rising against its riskier peers and falling against the safer ones.
A lack of market-moving data releases today could leave Sterling vulnerable to further fluctuations. GBP investors may focus on headlines surrounding the UK’s economic outlook and the Northern Ireland Protocol.
The Euro (EUR) strengthened yesterday amid hawkish comments from some European Central Bank (ECB) officials.
Policymaker Gabriel Makhlouf said that the bank will raise interest rates by at least 50bps in two weeks’ time. Meanwhile, colleague Francois Villeroy de Galhau said it was too early to talk about the terminal rate, and ECB Vice-President Luis de Guindos warned against softening the bank’s stance too soon.
Earlier this morning, German factory orders beat forecasts, showing 0.8% growth rather than the meagre 0.1% expected. This could support the Euro through this morning’s trade.
The Canadian Dollar (CAD) firmed against its weaker peers yesterday, as the oil-linked ‘Loonie’ enjoyed an uptick in crude prices and Canadian government bond yields. However, oil slipped later in the session, trimming CAD’s gains.
Canada’s latest balance of trade data could impact CAD, while a later decline in the Ivey PMI may weigh on the ‘Loonie’.
The Australian Dollar (AUD) managed to recoup losses overnight after the Reserve Bank of Australia (RBA) delivered its eighth consecutive interest rate rise and signalled more hikes to come.
The risk-sensitive New Zealand Dollar (NZD) initially ticked higher in overnight trade amid an improving market mood, but relinquished its gains as the optimism faded.
Contact Samuel Birnie
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