Pound Strengthens on Hawkish Remarks from BoE’s Saunders

Pound (GBP) Jumps on Hawkish BoE Comments 

The Pound (GBP) strengthened yesterday after the BoE’s Michael Saunders said that if the economy continues on its current path then the central bank may need to begin tapering bond purchases ‘fairly soon’. 

Saunders echoed Wednesday’s comments by Sir David Ramsden, a BoE Deputy Governor, who said that the UK may need to tighten monetary policy ‘sooner’ than expected after UK inflation surged to 2.5% in June. 

With no UK data out today, coronavirus concerns could impact the Pound, with Professor Chris Whitty warning yesterday evening that hospitalisation numbers could get ‘scary’ as the UK unlocks its economy. 

Euro (EUR) Weakened by Rallying US Dollar 

The Euro (EUR) weakened against many of its counterparts yesterday, as a rallying US Dollar (USD) weighed on the single currency due to the pair’s strong negative correlation. 

Fears over the spread of the Delta variant and the impact it may have on the European tourism season also put pressure on the Euro, with some countries announcing new restrictions earlier this week. 

Looking ahead, today’s balance of trade data from the Eurozone could bolster EUR, as it is expected to show a widening trade surplus. EUR investors will also be looking to the bloc’s CPI. Will easing inflation support the European Central Bank’s (ECB) dovish outlook or will the reading overshoot expectations? 

US Dollar (USD) Strengthens on Risk-Off Sentiment 

The US Dollar (USD) firmed through yesterday’s session, as a decreased appetite for market risk boosted the appeal of the safe-haven ‘Greenback’. 

The shift in market sentiment comes as the Delta variant causes cases to spike in various countries around the world and the global economic recovery shows some signs of slowing down. 

This afternoon, the latest retail sales figures from the US could potentially support the US Dollar. While sales are expected to contract, this may fuel the downbeat market mood and subsequently increase USD demand. 

Canadian Dollar (CAD) Slides on Fall in Employment 

The Canadian Dollar (CAD) tumbled yesterday, as the latest ADP employment change figures showed a shock decrease in private-sector employment by 294,200 jobs, versus the expected 270,000 increase. 

The commodity-linked currency was also dragged down by weak oil prices, with WTI crude trading below $72 a barrel. 

With oil prices still subdued this morning, the Canadian Dollar may struggle to make gains today. 

Australian Dollar (AUD) Firms on Modestly Improving Market Mood 

The Australian Dollar (AUD) trended higher in overnight trade, as a mild improvement in risk appetite lent support to the risk-sensitive ‘Aussie’. 

New Zealand Dollar (NZD) Climbs on Rising Inflation 

The New Zealand Dollar (NZD) jumped overnight, as New Zealand’s latest CPI unexpectedly increased from 0.8% to 1.3%, raising the prospects of a rate hike from the Reserve Bank of New Zealand (RBNZ). 

Samuel Birnie

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