The story in the past 24 hours has been another surge in the US Dollar.
In trade-weighted terms it has appreciated 0.5% to its strongest level since early October while against a basket of major currencies it has hit a three-year high. Strong US macro data – including material gains in the Philly Fed and NY Fed manufacturing indices in February – have added upward momentum to Dollar, as have broader market concerns about headwinds to global economic growth.
At the same time the Federal Reserve seems very comfortable with its current policy rate, unlike a number of other major central banks which are seemingly toying with the possibility of further rate cuts. The combination of a stable Fed rate and an appreciating Dollar will arguably not be music to President Trump’s ears.
The Euro has held up reasonably well, with EUR/USD still trading around 1.08, but GBP/USD – which had been hovering around 1.30 since last week – has once again dropped below 1.29 despite the release of slightly better-than-expected UK retail sales figures. Retail sales rose 0.9% mom in January (seasonally-adjusted) – a still modest recovery after two very weak months.
Similarly, AUD/USD lurched lower in Asian trading to just above 0.66 – an eleven year low – with markets seemingly focussing on the incremental rise in the Australian unemployment rate in January (to 5.3%) rather than another increase in total employment.
