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EUR/USD plunges to three-month low amidst equity selloff

currency-newsEUR/USD plunges to three-month low amidst equity selloff
The US dollar roared back to life on Tuesday, appreciating rapidly as an equity selloff resulted in a sharp drop in market risk appetite.

Meanwhile, the pound is trading in a narrow range so far this morning, with GBP/EUR flat at €1.1669 and GBP/USD muted at $1.3792. GBP/CAD is rangebound at C$1.7182, while GBP/AUD and GBP/NZD hold steady at AU$1.8392 and NZ$1.9635 respectively.

Coming up, will some hawkish FOMC minutes help to propel the US dollar even higher today?
 

What’s been happening?

The US dollar rocketed higher during yesterday’s trading session as a sharp selloff in equity markets prompted skittish traders to favour the safe-haven currency.

This upside in the ‘greenback’ was further supported by rising US Treasury yields, and came in spite of June’s ISM non-manufacturing index printing below expectations.

Significant USD demand undermined the appeal of the euro on Tuesday, due to the strong negative correlation between the pairing, with the single currency also struggling in light of some underwhelming economic data from Germany.

The pound, meanwhile, got off to a strong start yesterday as it continued to be underpinned by Boris Johnson’s recent announcement that England’s remaining coronavirus restrictions will be lifted on 19 July.

However, Sterling began to retreat from its best levels later in the afternoon, amidst renewed Brexit concerns, as the EU threaten legal action over the UK’s continued violation of the Brexit agreement.
 

What’s coming up?

Centre stage today will be the publication of the minutes from the Federal Open Market Committee’s (FOMC) June policy meeting.

The Federal Reserve’s most recent policy statement stuck a notable hawkish chord. Could the minutes reinforce this new hawkish bias and catapult the US dollar even higher?

In the meantime, the publication of Germany’s latest industrial production figures could exert additional pressure on the euro today, after reporting a surprise contraction in factory output in May.

In the UK, with GBP economic releases thin on the ground today, the pound may struggle to maintain its recent momentum, particularly as lingering Brexit uncertainty begins to dampen Sterling sentiment.
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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