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US Dollar Surges as Fed Announces Beginning of Balance Sheet Unwinding

Categories: AUD, CAD, EUR, GBP, Markets, News, NZD, USD


GBP/USD 1 Week Chart

The Pound (GBP) advanced against the majority of its peers yesterday following a better than expected retail sales report.

Markets were upbeat as data showed retail sales jumped from an upwardly revised 0.7% to 1% in August, outpacing forecasts that sales growth would have slowed to 0.2% and increasing the odds that the Bank of England (BoE) may seek to raise interest rates in November.

Meanwhile Sterling may register further gains this morning should mortgage approvals have risen in August as predicted.


The Pound Euro (GBP EUR) exchange rate rallied by nearly a cent from its lows on Wednesday as investors were surprised by the sharp jump in UK retail sales last month.

While Germany released better than expected PPI figures, it did little to slow Sterling’s advance as speculation of a November rate hike from the BoE increased.

Looking to this afternoon the Euro may slip even further on expectations that the latest Eurozone Consumer Confidence flash will reveal a slight dip in household sentiment this month.

US Dollar

Sterling nosedived by around a cent against the US Dollar (USD) yesterday evening as the Federal Reserve concluded its September monetary policy meeting, with an announcement that the bank will finally begin to wind down its considerable stimulus programme.

Market sentiment was also bolstered by hints from the Fed that it still plans to raise interest rates one final time this year, with CME’s FedWatch Tool showing that odds of a December rate hike rose to around 70% in the wake of the Fed’s policy meeting.

However the ‘Greenback’ may be forced to relinquish some of its gains later this afternoon as the Philadelphia Fed Manufacturing Index is expected to have dipped this month.

Canadian Dollar

Despite oil prices closing at their highest levels in four months on Wednesday, the Pound Canadian Dollar (GBP CAD) exchange rate was still able to post gains as the surge in the US Dollar placed significant pressure on the ‘Loonie’.

Australian Dollar

After falling to a new weekly low against the Australian Dollar (AUD) yesterday afternoon Sterling rallied hard in overnight trading as the latest Fed announcement and subsequent surge in the US Dollar drove investors away from the ‘Aussie’.

New Zealand Dollar

The Pound New Zealand Dollar (GBP NZD) exchange rate painted a similar picture to its antipodean cousin during the Asian trading session last night, with the ‘Kiwi’ tumbling as traders flocked towards the US Dollar.

TorFX Author: TorFX

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