Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD takes another step higher on “Red Sweep”
The greenback surged to one-year highs yesterday after Associated Press confirmed Republicans had reached the 218 seats required for a majority in the House of Representatives completing a “Red Sweep” of all three elected branches of the US Federal Government.
The news should mean it will be easier for President-Elect Donald Trump to pass his agenda of tariffs and tax cuts that are seen as potentially inflationary – boosting the US dollar.
The USD index gained 0.4% as it hit the highest level since November 2023.
The Aussie and kiwi again led the losses with the AUD/USD and NZD/USD both down 0.6%.
The USD/CAD climbed 0.5% as the pair hit four-year highs.
In Europe, the EUR/USD and GBP/USD both fell 0.4%.
The USD/CNH climbed 0.1% while USD/SGD gained 0.3%.
Powell not in “hurry” to cut rates
The US dollar was also boosted by more hawkish commentary from Federal Reserve chair Jerome Powell, who said the Fed was not in a “hurry” to cut interest rates.
Powell said “the strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
The probability of a 25bps rate cut in December fell from 83% in the previous session on to 56% on the comments (source: Bloomberg). The USD/JPY was most sensitive to the commentary with the USD/JPY up 0.5% to four-month highs.
Commodities hit by greenback strength
The Aussie and kiwi’s recent underperformance – and the Canadian dollar’s drop to four-year lows versus the USD – has also been driven by the sharp fall seen in commodities this month.
So far in November, gold is down 6.0%, iron ore is down 4.0% while crude oil is flat, but broadly near 15-month lows.
The stronger US dollar is one driver of this commodity weakness, but concerns around how trade tensions between the US and China might impact Chinese growth have also contributed to the weakness in the commodity space. Further losses could be negative for commodity currencies like the Aussie, kiwi and CAD.
Aussie, kiwi tumble to bottom of range
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 11 – 16 November
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
