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USD rallies after unexpected FOMC minutes

currency-newsUSD rallies after unexpected FOMC minutes
The US dollar rallied on Wednesday as the minutes from the latest Federal Open Market Committee (FOMC) meeting struck a more hawkish tone than expected.
Meanwhile, the pound is off to a slow start this morning, with GBP/EUR flat at €1.1589 and GBP/USD steady at $1.4132. GBP/CAD is muted at C$1.7105, while GBP/AUD and GBP/NZD retreat to AU$1.8214 and NZ$1.9641, respectively.
Looking ahead, will another drop in US jobless claims help propel the US dollar even higher later this afternoon?
What’s been happening?
The US dollar appreciated through yesterday’s European session as it was bolstered by rising US Treasury yields.
This uptick in USD exchange rates then accelerated following the publication of the minutes from the Federal Reserve’s latest policy meeting, as they revealed some policymakers believe the bank needs to start discussing tapering its stimulus programme 'at some point'.
The pound initially ticked higher during yesterday’s session following the publication of the UK’s consumer price index (CPI).
This revealed that inflation in the UK more than doubled last month, rising from 0.7% to 1.5% to strike its highest levels since March 2020.
However the upside in Sterling proved very short-lived, with GBP exchange rates falling back as the pound was subject to some profit taking after drifting into overbought territory.
The euro, meanwhile, lacked any strong directional bias on Wednesday following the release of the Eurozone’s CPI figures.
While the headline release printed in line with expectations, an unexpected fall in core inflation last month capped any upside in the single currency.
What’s coming up?
Turning to today’s session, the most important data release looks to be last week’s US initial jobless claims.
This afternoon’s release could provide a boost for the US dollar as new claims are projected to fall to a new post-pandemic low, boosting hopes the US economy will have added a steady rise in new jobs in May, following a disappointing slowdown in new payrolls last month.
For GBP investors the focus today will be on the Confederation of British Industry’s latest industrial orders index, where a positive reading could aid a recovery in the pound later this morning.
Meanwhile, EUR investors will turn their attention to the Eurozone’s latest PMI figures in the second half of this week, amidst hopes that economic activity in the bloc will have continued to improve this month.
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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