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GBP

Dollar Juggernaut Slows, But Remains Powerful

Treasury yields are slipping and the dollar appears on the verge of snapping a five-day winning streak, but losses look likely to remain moderate after Fed chair Jerome Powell effectively reset the clock on rate cuts, suggesting that the central bank would need to see several more monthly inflation reports before beginning to ease policy. Speaking during a question-and-answer session in Washington yesterday, Powell said “The recent data have clearly not given us greater confidence” in inflation’s return to target, and “instead indicate that it is likely to take longer than expected to achieve that confidence”. “We think policy is...

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Higher for (even) longer

• Fed speak. Chair Powell endorsed the upswing in rates pricing by noting the lack of further progress on inflation. US yields rise, equities fall.• USD support. The rates outlook is underpinning the USD. AUD touched its lowest level since mid-November with USD trends overpowering China GDP.• Priced in? Markets are now discounting a very ‘hawkish’ Fed interest rate outlook. The lofty USD may need another catalyst to move even higher. Market sentiment has stayed on the defensive as the outlook for ‘higher for longer’ US interest rates continues to sink in. The major European equity markets fell overnight (EuroStoxx50...

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USD upswing continues

• Shaky sentiment. Middle East jitters were compounded by stronger US retail sales. Higher US bond yields weighed on equities & supported the USD.• AUD lower. Yesterday’s modest AUD recovery unwound overnight. The AUD is near its 2024 lows. USD upswing is pressuring other currencies.• China & Fed speakers. China Q1 GDP released today. Several US Fed members also due to speak. The list includes Fed Chair Powell. After the market mood picked up during yesterday’s Asian trade sentiment soured overnight. The familiar forces of jitters about the situation in the Middle East after Israel vowed to respond and outlook...

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Middle East tensions flare up

• Negative vibes. Sentiment soured on Friday as Middle East concerns rose. Equities & bond yields lost ground. The stronger USD pushed down the AUD.• Middle East. The situation in the Middle East remains fluid. Developments will be front of mind for investors at the start of the new week. Will oil prices spike?• Event radar. US retail sales due tonight. Several Fed members speaking this week. Across the region, China GDP, NZ CPI & AU jobs report are due. Risk sentiment ended last week on the backfoot, and geopolitical developments over the weekend point to further potential short-term turbulence....

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Calm After the Storm Brings Currency Volatility Down

Treasury yields are stabilising and the dollar is recovering ground after losing a little altitude during yesterday’s session when a closely-watched input cost index climbed by less than expected. The producer price index for final demand rose just 0.2 percent month-over-month in March, with a third consecutive increase in services costs obscuring a cooling in many of the components that go into the Fed’s preferred inflation indicator. Taken in combination with Wednesday’s consumer price print, the data suggest that the personal consumption expenditures index will rise somewhere between 0.2 and 0.3 percent on a month-over-month basis when the next update...

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