Euro (EUR) Slumps in Run Up to ECB Decision

Pound (GBP) Firms on Renewed UK Optimism 

The Pound (GBP) managed to regain ground against the Euro (EUR) and the US Dollar (USD) but was still relatively subdued against its other rivals. 

The upside came as confidence in the UK economy was boosted by Next’s impressive sales figures for the second quarter in 2021 and a larger-than-expected drop in public-sector borrowing. 

However, coronavirus concerns capped Sterling’s gains, with some members of the Scientific Advisory Group for Emergencies (Sage) warning that restrictions may need to be reintroduced

The Pound faces some mixed data releases today, with business optimism expected to jump and factory orders forecast to drop. Meanwhile, the Covid situation will likely continue to affect GBP exchange rates. 

Euro (EUR) Softens ahead of ECB Interest Rate Decision 

The Euro (EUR) weakened against many of its peers yesterday, with investors wary of placing bets ahead of the European Central Bank’s (ECB) interest rate decision later today. 

Investors expect the ECB to take a dovish stance, which weighed on the single currency yesterday. However, the downside was limited by the Euro’s negative correlation to a softening US Dollar. 

While dovishness from the ECB could dent EUR exchange rates, it may find some support later on. Consumer confidence is expected to have risen to its highest level since August 2000 this month. If estimates are accurate, the Euro could get a boost. 

US Dollar (USD) Down as Market Mood Improves 

The US Dollar (USD) slipped during yesterday’s session, as a rebound in risk appetite sapped demand for the safe-haven currency. 

Following better-than-expected company reports, European stock markets rebounded across the board, with the UK FTSE 100 up by 1.8% and the European Stoxx 600 up by 1.7%. This renewed economic optimism saw investors abandon the US Dollar for riskier assets. 

USD may remain muted this morning, as stock markets continue to recover. But this afternoon’s jobless data from the US could bolster the ‘Greenback’, if it meets the upbeat expectations. 

Canadian Dollar (CAD) Strengthens as Oil Prices Surge 

The commodity-linked Canadian Dollar (CAD) soared yesterday, as WTI crude prices recovered by $3 a barrel. 

With no data coming from Canada today, oil prices will likely be the key factor in CAD exchange rates. Can oil sustain its recovery? 

Australian Dollar (AUD) Climbs on Upbeat Trade 

The Australian Dollar (AUD) continued to climb overnight, with the risk-sensitive ‘Aussie’ propelled by the prevailing bullish market mood. 

New Zealand Dollar (NZD) Flat despite Risk-On Mood 

The New Zealand Dollar (NZD) was rangebound in overnight trade, after strengthening in yesterday’s European session, as a drop in commodities offset an increased appetite for risk.