Currency Recap: EUR Strength, USD Falters, CAD Holds Ground, AUD Strong & NZD Weak

US Dollar Relinquishes Post-Fed Gains – Elevated Jobless Claims Dent USD Demand

Initially, the US Dollar (USD) benefited from the Federal Reserve’s hawkish rate pause. However, the currency reversed a substantial portion of its gains overnight as data revealed that jobless claims in the United States remained elevated during the past week. The upcoming release of the University of Michigan’s consumer sentiment index will be closely watched, as an improvement in sentiment could provide support for the US Dollar.

Canadian Dollar Steady as Oil Prices Rise

The Canadian Dollar (CAD) maintained its stability, as a rise in oil prices supported the commodity-sensitive currency, known as the ‘Loonie.’ The positive correlation between the CAD and the USD did not significantly impact the currency, thanks to the favorable dynamics of oil prices. Moving forward, fluctuations in oil prices are expected to act as the primary catalyst for movement in CAD exchange rates, potentially strengthening the Canadian Dollar if prices continue to climb.

Euro Lifted by Hawkish ECB – Bank Raises Rates by 25bps and Signals More Hikes Are to Come

The Euro (EUR) demonstrated strength after the European Central Bank (ECB) announced a 25bps interest rate hike, in line with expectations. The ECB’s outlook was notably hawkish, with President Christine Lagarde indicating a high likelihood of another rate hike in July. The Eurozone’s upcoming inflation figures could have an impact on the currency’s performance, as confirmation of a sharp deceleration in inflation last month may limit the Euro’s upside potential.

Australian Dollar & RBA Bets Bolstered by Strong Jobs Report

The Australian Dollar (AUD) received significant support following the release of Australia’s latest jobs report. The unexpected drop in unemployment, combined with stronger-than-anticipated employment growth, heightened expectations of another rate hike by the Reserve Bank of Australia (RBA) in the upcoming month. This positive development underpinned sentiment surrounding the AUD, with investors favoring the currency. As domestic data remains limited, the movement of the Australian Dollar is expected to be closely tied to market risk appetite. However, there is a possibility that a cautious mood among investors could put pressure on AUD exchange rates.

New Zealand Dollar Dented by Risk-Off Flows – Markets Unnerved by Prospect of Higher Interest Rates

The New Zealand Dollar (NZD) experienced a decline in value due to softening market sentiment, which diminished demand for this risk-sensitive currency. The prospect of higher interest rates unnerved investors, leading to a cautious approach in trading the NZD. However, the currency may have the opportunity to rally if the Business NZ Performance of Manufacturing Index (PMI) reports an improvement in manufacturing activity from the previous month.

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