US Dollar Unable to Maintain Momentum in Spite of Hawkish Fed Minutes

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  • Hawkish Fed Minutes Failed to Keep Australian Dollar on Weak Footing - AUD rates remain vulnerable to risk aversion
  • Pound Slumped After Unexpected Downward Revision to Fourth Quarter UK GDP - Odds of BoE interest rate hike diminished
  • Retail Sales Contraction Extends Canadian Dollar Losses - Weaker inflation could exacerbate CAD softness
  • Markets Moved to Price in Odds of Four 2018 Fed Rate Hikes - US Dollar struggled to hold onto bullish trend

Australian Dollar

Although the latest Federal Reserve meeting minutes proved a little more hawkish than anticipated the mood towards the Australian Dollar still improved on Thursday. After its recent bout of bearishness the downside potential of the 'Aussie' was somewhat limited, helping AUD exchange rates to shrug off bets of a faster pace of Fed tightening. Markets remain rather hopeful over the outlook of the global economy, in spite of the protectionist rhetoric of the US administration, to the benefit of the higher-yielding AUD.

However, if the sense of risk appetite deteriorates significantly ahead of the weekend this could still keep the Australian Dollar from holding onto its gains for long.


In a disappointing move, the Office for National Statistics lowered its UK growth forecasts for the fourth quarter of 2017. As a result the headline gross domestic product was revised down from 0.5% to 0.4% on the quarter, prompting the Pound to trend sharply lower across the board. This weaker showing also raises the risk of deterring the Bank of England (BoE) from raising interest rates again sooner rather than later.

With markets still lacking any real sense of clarity over the UK approach to Brexit Sterling looks set to remain on a softer footing.


EUR exchange rates found some support on the back of the European Central Bank's (ECB) latest meeting minutes, which showed signs of greater division amongst policymakers. With a number of ECB officials shifting towards a more hawkish policy outlook demand for the Euro naturally picked up. Even though the odds of any imminent change in the ECB's policy stance remain slim this was still enough to lift the single currency for the time being.

Confirmation that the Eurozone consumer price index dipped from 1.4% to 1.3% in January may encourage further Euro selling this evening.

US Dollar

Markets were caught slightly off-guard by the tone of January's Federal Open Market Committee (FOMC) minutes, which showed that a number of policymakers have revised up their growth forecasts. This naturally suggests that the Fed is on course to raise interest rates more aggressively than previously thought, with investors scrambling to price in the prospect of four rate hikes before the end of the year. However, despite a solid improvement in January's leading index the US Dollar was unable to maintain its bullish run for long.

In the absence of any fresh US data today the upside potential of USD exchange rates may well be limited.

Canadian Dollar

Confidence in the Canadian economy continued to deteriorate overnight after December's retail sales data disappointed. Falling short of forecast, sales unexpectedly contracted -0.8% on the month as consumer spending diminished over the festive period. This does not bode overly well for the domestic outlook going forward, potentially giving the Bank of Canada (BOC) further cause for caution. With oil prices still under pressure there was little to support the Canadian Dollar.

Disappointment from tonight's consumer price index data could see CAD exchange rates extending their losses further.

New Zealand Dollar

Although New Zealand credit card spending contracted -0.6% on the month in January this failed to keep NZD exchange rates on a weaker footing for long. Although optimism regarding the underlying health of the New Zealand economy remains limited the New Zealand Dollar was still able to benefit as the general sense of market risk appetite picked back up once again.

With forecasts pointing towards a solid uptick in fourth quarter retail sales the 'Kiwi' is likely to find further support this morning.

Data Released

February 23rd 07:45 NZD Retail Sales Ex Inflation (QoQ) (4Q) 1.3%
February 23rd 20:00 EUR Eurozone Consumer Price Index (YoY) (JAN F) 1.3%
February 23rd 23:30 CAD Consumer Price Index (YoY) (JAN) 1.5%

Post by TorFX

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