Pound (GBP) Dented on EU Warning
The Pound (GBP) had mixed success in yesterday’s trading session, shedding its gains against the US Dollar (USD) and the Euro (EUR) in the afternoon while climbing against its other counterparts.
The downside in Sterling came as Brexit tensions over the Northern Ireland protocol flared once more, despite the three-month extension to the grace period granted by the EU.
European Commissioner Maros Sefcovic warned that the EU may ‘step up’ legal proceedings against the UK if it continues to violate the terms of the Northern Ireland protocol once the extended grace period is over.
With no notable UK data releases due today, domestic news could drive most movement in the Pound.
Euro (EUR) Rebounds from Lacklustre German Data
The Euro managed to rebound against most of its major rivals yesterday despite German data falling far short of market expectations.
A surprise 3.7% slump in German factory orders and larger-than-expected falls in economic sentiment for both Germany and the Eurozone initially saw EUR tumble. However, the single currency bounced back in the afternoon, with no clear catalyst for the movement.
Turning to today, the Euro may lose more ground following Germany’s industrial production figures, which unexpectedly contracted by 0.3%.
US Dollar (USD) Gains on Cautious Market Mood
The US Dollar strengthened yesterday, despite the ISM non-manufacturing PMI failing to hit market forecasts.
The upside came amid a risk-averse market mood, triggered by a slump in equity markets, which increased demand for the safe-haven US Dollar.
USD investors will be eagerly awaiting the minutes from the latest Federal Open Market Committee meeting, due to be released this evening. Any suggestions that the Federal Reserve may tighten monetary policy could boost the ‘Greenback’.
Canadian Dollar (CAD) Down as Oil Prices Plunge
The Canadian Dollar (CAD) slipped yesterday, as the oil-sensitive ‘Loonie’ was dragged down by a slump in oil prices.
WTI crude dropped by over $3 a barrel amid fears that the UAE may increase oil production, prompting others to follow suit, after an OPEC+ supply dispute.
This afternoon’s Ivey PMI for Canada may lend the ‘Loonie’ some support, as forecasts predict another increase in economic activity.
Australian Dollar (AUD) Firms on Increased Risk Appetite
The Australian Dollar (AUD) ticked higher in overnight trade, after slumping yesterday afternoon, as a slight increase in risk appetite helped bolster the ‘Aussie’.
New Zealand Dollar (NZD) Gains on Risk-On Trade
The New Zealand Dollar (NZD) also regained some ground overnight, with the risk-sensitive ‘Kiwi’ benefitting from a more bullish market mood.