US Dollar Plunges as Trump Criticises Fed Policy

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Headlines

  • AUD Exchange Rates Pushed Higher in Spite of Escalating Trade War Fears – Australian Dollar capitalised on US Dollar weakness
  • Trump Attack on Federal Reserve Weighed on US Dollar – Investors spooked by criticism of interest rate hikes
  • Better-Than-Expected Inflation Data Boosted Canadian Dollar – Confidence in domestic economy improves
  • Euro Slumped as Current Account Surplus Narrowed Sharply – Eurozone continues to demonstrate signs of sluggishness


Australian Dollar

The Australian Dollar received a significant boost heading into the weekend thanks to comments from Donald Trump, who criticised the Federal Reserve for raising interest rates. This left the US Dollar in a slump, encouraging investors to pile into higher-yielding currencies instead. Even though the threat of a further escalation of trade tensions between the US and China also emerged this failed to knock much of the wind out of AUD exchange rates.

Even so, worries over the prospect of a full-blown US-China trade war could still drag on the Australian Dollar today.

Sterling

The latest UK public sector net borrowing figures showed that government borrowing had fallen to an eleven-year low in the April-June period. This encouraged greater confidence in the outlook of the domestic economy, even as a significant degree of Brexit-based uncertainty continues to weigh on the minds of investors. However, comments from chief EU negotiator Michel Barnier helped to boost Sterling as he indicated that a deal could be reached in October or November.

With the UK parliament entering its summer recess this week GBP exchange rates could benefit from reduced political jitters.

Euro

May’s Eurozone current account showed a significant narrowing on the month, with the surplus easing from 27.3 billion to just 4.6 billion. Confidence in the underlying health of the Eurozone economy was naturally dented by the data, especially as trade tensions with the US remain heightened. As the threat of US tariffs on EU carmakers persists, with Trump having taken aim at the EU once again, there was little support for the Euro during Friday’s European session.

As forecasts point towards a further decline in the latest Eurozone consumer confidence index the single currency may come under further pressure tonight.

US Dollar

Demand for the US Dollar slumped dramatically on Friday as markets reacted to various comments from Donald Trump. Investors were spooked by his attacks on the Federal Reserve and threat to impose tariffs on all Chinese imports. This escalation in protectionist rhetoric left USD exchange rates under significant pressure, even though the administration’s preference for a weaker US Dollar is unlikely to sway the Fed from its more hawkish policy outlook.

A rebound in June’s existing home sales figure could give the US Dollar some cause for confidence in the short term.

Canadian Dollar

A stronger-than-expected Canadian consumer price index encouraged CAD exchange rates to recover ground ahead of the weekend. As inflationary pressure picked up from 2.2% to 2.5% in June confidence in the underlying health of the Canadian economy improved. The appeal of the risk-sensitive Canadian Dollar also strengthened on the back of US Dollar weakness, in spite of worries over the future of US-Canada trade relations.

If Canadian wholesale trade sales data proves similarly positive the Canadian Dollar could extend its gains further.

New Zealand Dollar

Investors were surprised to find that New Zealand credit card spending had risen sharply on the year in June, clocking in at 5.7%. This stronger showing suggests that domestic sentiment remains resilient in spite of other signs of economic sluggishness. The general increase in market risk appetite, driven by the softening US Dollar, also gave a boost to NZD exchange rates.

Any deterioration in investor sentiment leaves the New Zealand Dollar vulnerable to renewed losses, however.


Data Released

July 23rd 22:30 CAD Wholesale Trade Sales (MoM) (MAY) 
July 24th 00:00 EUR Eurozone Consumer Confidence (JUL) -0.75
July 24th 00:00 USD Existing Home Sales (JUN) -0.2%

Post by TorFX

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