The US dollar was the main beneficiary of an extremely risk averse tone in currency markets on Wednesday. Investors flocked to the US dollar and away from the pound and euro, which was particularly noteworthy given the proximity to elections in the UK and France.
Markets continued to reel from comments by the Federal Reserve’s Michelle Bowman, who said that she anticipated another interest rate rise before any cuts could be made.
Over the course of yesterday, the euro lost around a quarter of a per cent to the US dollar. Sterling fell against the euro and lost a slightly larger amount —0.4%, to be exact – to the US dollar.
The euro continued to come under pressure, following less than rosy Germany consumer confidence numbers and uncertainty ahead of the first round of French elections.
The Japanese yen yesterday fell to its lowest level against the US dollar since 1986. That could well force the Japanese government to intervene in currency markets, something it has done in the past when the yen dips below the 160 mark against the US dollar.
New home sales in the US fell by 11% in May compared to April. That was the lowest total in 11 months and came well below forecasts as homebuyers continued to struggle with high borrowing costs and the record average price of property.
The UK election coverage centred around the growing betting scandal at the heart of Westminster. That storyline was augmented by the even more bizarre news that an Islington Labour member had been suspended as part of an alleged honeytrap scheme.
Keir Starmer and Rishi Sunak faced off in their last televised debate before next Thursday’s vote. With just one week to go until the election, sterling is entering the most dangerous passage of the political cycle. We’ve already seen markets get a little jumpy when it comes to the election, but past events provide a stark warning of just how quickly currency markets can be flipped on their head.
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