Dollar rate today (31/10): USD in control as EUR takes a hammering

Also of interest to currency market watchers is the state of the euro - what a reversal in fortunes for the shared currency thanks to some eye-opening economic data releases. Read our report on the matter here.

As we head into the early afternoon trading session we see the euro dollar exchange rate has moved higher by an impressive 0.7 pct to reach 1.3640.

The pound to US dollar exchange rate is meanwhile pretty much unchanged at 1.6033.

(PS: The above are spot market quotes; your bank will affix a discretionary spread to the figures when passing on a retail FX rate. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering up to 5% more FX. Please find out more here.)

US Federal Reserve sentiment pushes the dollar rate higher

We called it in yesterday's coverage - markets were overly positioned for dovish FOMC event.

So when the verdict was reached that the Fed is 'less dovish' than markets were expecting buyers came back to the US dollar.

The statement accompanying the Fed rate announcement did enough to push the GBPUSD rate towards 1.60. This has put the greenback in a good position ahead of unemployment claims due this afternoon.

"With sterling on the back foot, there is plenty of downside risk and provided unemployment claims beats expectations we could see this rate decline further," warns Sasha Nugent at Caxton FX.

Also getting into the mix was the ADP Employment change came in a little weaker than expected.

The report showed employment growth had slowed in the private sector, with downward revisions to the previous month.

The report was negative for USD but wasn’t as bad as worst feared and wasn’t sufficient to trigger renewed USD weakness.  

Looking ahead, initial jobless claims and Chicago PMI could see some interest this afternoon; however month end portfolio rebalancing flows will likely have a greater impact on the USD.

"Our model suggests flows will be USD negative due to relative US equity outperformance through the month. The 79.0 level in the USD index remains decent support on the downside," say Lloyds Bank.

However, with the heavy euro selling being witnessed today we doubt that end of month flows will be of consequence.

We see a further squeeze lower for the euro ahead which will continue to benefit the US dollar.