Sterling stumbled against the dollar on Friday after a much larger-then-expected jump in U.S. jobs growth lifted the dollar as it drove bets that the Federal Reserve could opt for a bigger interest rate hike next month. The pound reversed earlier gains, falling as much as 1% on the day to a three-week low of $1.20. It was last down 0.8% at $1.21295. The U.S. Labor Department’s closely watched employment report showed nonfarm payrolls surged by 517,000 last month, blowing past expectations for an addition of 185,000 jobs. “This (NFP) ...

Dollar bear trend could pick up speed in the second quarter At the heart of the bearish dollar view is the call that the Fed will shift to a reflationary stance in the second half of 2023, US short-dated yields will fall and those yield differentials will move against the dollar. This story should be particularly acute for EUR/USD, where sticky core inflation in the eurozone means that the European Central Bank will not be considering rate cuts until late 2024. At the same time, lower natural gas prices have ...

USD: Downside risks from data today The dollar has essentially erased all the post-FOMC losses after markets questioned the hawkish rhetoric by the ECB and European rates went on a huge rally yesterday. We analyse what the last two days of central bank meetings have meant for EUR/USD in this note. It’s been quite clear that markets have doubted both Fed Chair Jerome Powell’s and ECB President Christine Lagarde’s attempts to hang on to hawkish communication, although dovish bets on the Fed appear more strongly founded at this stage. This ...

The dollar rose slightly on Friday, sustaining some momentum after jumping in the previous session following a raft of central bank decisions in Europe. Trading was relatively subdued as markets waited for the latest U.S. employment data later in the day which may shift U.S. Federal Reserve policy. The dollar picked up against the euro, with the latter down 0.1% to $1.09 in early European trading. The euro remained well above the 20-year low of $0.953 hit in September, however. The Federal Open Market Committee on Wednesday raised interest rates ...

The British pound fell against the dollar on Thursday after the Bank of England raised its main interest rate to the highest level since 2008 while hinting that rates were near their peak. The BoE voted 7-2 to raise its interest rate by 50 basis points to 4.00% in its 10th straight hike, a move mostly expected by investors and economists. But it dropped its pledge to “respond forcefully, as necessary” to signs of further inflationary pressure, adding that inflation had probably peaked. “Since the November monetary policy report we’ve ...

USD: Phlegmatic Powell offers little pushback against the rally The dollar was relatively unchanged on the release of last night’s FOMC statement, but Fed Chair Powell’s press conference comments sent it around 1% lower across the board. Listening to the press conference, a few things that stood out to us were: for the first time, we can see the disinflation process has started, a refusal to push back against the softening in financial conditions in the form of lower bond yields and higher equities, a data-dependent approach to what the ...

The euro sat at a 10-month high against the dollar on Thursday, ahead of a European Central Bank meeting at which markets expect a half-percentage point rate increase, a day after the U.S. Federal Reserve slowed the pace of its rises to 25 basis points. The Fed also said it had turned a corner in the fight against inflation, its first explicit acknowledgment that price increases are slowing, underpinning market expectations that the end of the central bank’s rate-rise campaign is near and cuts could follow. The dollar’s most dramatic ...

The dollar fell on Wednesday before the Federal Reserve is expected to hike interest rates by an additional 25 basis points, and investors will be watching to see if Fed Chair Jerome Powell strikes a hawkish tone about future monetary policy. The U.S. central bank is seen as nearing the end of its tightening cycle, and Fed officials have stressed the need to hold rates in restrictive territory for a while to bring down inflation, even as investors price in rate cuts for the second half of the year. “The ...

The negative impact of currency fluctuations on North American companies’ results rose sharply again in the third quarter of 2022, data from treasury and financial management firm Kyriba showed on Tuesday. The collective exchange-rate hit, including on companies in the United States, Canada and Mexico, was $43.15 billion in the third quarter of last year – the highest negative impact on record for the firm with data going back to 2013, Kyriba said in its report. The negative effect was $34.25 billion in the second quarter of 2022. Strong gains ...

Global investment banks have raised their forecasts for the Chinese yuan this year on expectations the country’s economic reopening and Beijing’s decision to relax property sector curbs will trigger strong capital inflows. The bullish forecasts follow Beijing’s exit from a crippling zero-COVID strategy in early December and reversion to pro-growth policies to restore investor confidence and prioritise domestic demand. “China’s reopening and visible policy shift toward the property sector has lifted the yuan’s outlook, and there could be more upside in the medium term,” said Lemon Zhang, FX strategist at ...

USD: Hawkish Fed can lift the dollar The dollar enters FOMC day after having shown some resilience over the past few sessions, which was likely the consequence of some defensive positioning ahead of key central bank meetings, which kept risk assets capped. Still, the last important piece of data before the Federal Reserve announcement – yesterday’s Employment Cost Index – offered more reasons to think the Fed is indeed close to the peak. Labour costs eased for a fourth consecutive quarter in 4Q, moving from 1.2% to 1.0%, the same ...

The dollar edged lower against the euro on Wednesday ahead of an eagerly-awaited Federal Reserve policy decision with investors hoping the U.S. central bank will signal the end of its interest rate hiking cycle. After a series of jumbo rate hikes in 2022 to tame inflation, the market expects a quarter-of-a-percentage-point increase in the Fed benchmark interest rate to 4.75%. It would be the smallest increase since the central bank kicked off its tightening cycle 10 months ago with one the same size. Less clear is whether the central bank ...

Egypt’s net foreign assets (NFAs) improved by 47.28 billion Egyptian pounds in December, marking a second month of increases after it allowed its currency to depreciate sharply in October, central bank data showed. NFAs improved to a negative 494.3 billion Egyptian pounds from a negative 541.5 billion in November. This works out to an improvement of about $2.06 billion using end-of-month central bank exchange rates, according to Reuters calculations. Before the October depreciation, the central bank had been relying on NFAs, which represent banking system assets owed by non-residents minus ...

USD: Some support going into the Fed meeting European data and global risk sentiment drove G10 FX dynamics yesterday. A weak start to the week for risk assets kept the dollar supported, especially during the US session, and signalled some market cautiousness ahead of multiple risk events: the FOMC tomorrow, ECB and Bank of England on Thursday, and US payrolls on Friday. Today, the last few pieces of US data before the Fed decision will be watched quite closely. Particular interest will be on the Employment Cost Index (ECI), which ...

The dollar ticked higher on Tuesday ahead of a raft of central bank decisions but remained on track for its fourth consecutive monthly loss. The Federal Reserve will set interest rates on Wednesday, followed by the European Central Bank (ECB) and Bank of England (BoE) on Thursday. Currencies struggled for direction overnight, with the euro slipping against the dollar in early trade in Europe and was last down 0.41% at $1.081. It was “likely some profit-taking ahead of the key event risks just ahead,” said Alvin Tan, head of Asia ...