US Dollar slides on Fed delays

The US Federal Reserve meeting delivered what everyone expected but their confirmation that US interest rate rises are still not on the near, or medium-term, horizon, caused a US Dollar sell off. The Pound managed to shunt the USD up above $1.39 for the first time since 28th June and the Euro hefted the USD up to $1.1850 for the first time in a fortnight.

Sterling’s gain against the USD wasn’t isolated though. This morning, in the interbank market, a pound will buy more than AUD 1.88, just shy of NZD 2.00 and the GBPCAD skirted C$1.75 yesterday but didn’t quite get above it. The British Prime Minister’s announcement of further unlocking of the UK economy, particularly concerning international travel, buoyed sentiment towards the Pound and we can see that in the gains of the last 24 hours. The target is an obvious one. $1.40 is a psychological barrier but it is likely to be tested, if not breached on the first attempt.

The pound drives higher

Sterling’s gains against the Australasian and Asian currencies are also remarkable when you consider the work the Chinese authorities are doing in trying to calm equities market jitters. Those activities and a cash injection into the financial markets in China ignited Asian share prices and should be boosting the likes of the Aussie and Kiwi Dollars but that was overwhelmed by Sterling’s exuberance.

NZD weakened by poor business confidence

The NZ Dollar was also knocked by a drop in NZ business confidence. The ANZ business confidence index came in at minus 3.8; down from last month and the 6th negative reading in the last 8 surveys.

The GBPEUR exchange rate had another crack at breaking through EUR 1.1750 but is still contained by that resistance level. However, the trend is upwards and the target of EUR 1.18 beckons. I suspect we will see a test of that.

US GDP and jobs data control USD today

Today’s big data events come wrapped in the stars and stripes. US weekly jobless claims have become increasingly significant because the Federal Reserve is focussed on jobs growth as a major component in its plans for normalising interest rates. The US GDP data for the 2nd quarter of 2021 is also key of course. We are expecting quarterly growth of around 8.5%. Anything better than that will stabilise the US Dollar to some degree.

Happy Birthday to the Arc de Triomphe, which was inaugurated on this day in 1836. And on this day in 1971, the Lunar Rover was driven on the surface of the moon for the first time. And it is still on the surface of the moon today. If only they could remember where they parked it.

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