Pound (GBP) Undermined by Energy Fears
The Pound (GBP) had a mixed day yesterday as a better-than-expected order book balance from the Confederation of British Industry (CBI) was offset by the ongoing gas crisis.
Despite the UK government striking a deal to restart CO2 production, headwinds persisted, with warnings that the country could face a very difficult winter this year.
With no UK data out today, concerns over the energy crisis may continue to dent GBP demand.
Euro (EUR) Firms as Markets Rally
The Euro (EUR) strengthened against most of its major rivals yesterday amid a strong recovery in the European stock market, while Wall Street looked hesitant ahead of the Federal Reserve decision today.
Travel-related stocks led the rally, boosted by Monday’s announcement that the US is easing restrictions for fully vaccinated European travellers.
Looking ahead, the Eurozone’s latest consumer confidence report is expected to reveal the bloc’s third successive month of falling confidence, which could dent EUR exchange rates.
US Dollar (USD) Trends Higher on Tentative Trade
The US Dollar (USD) regained ground in yesterday’s session as market sentiment shifted back to a bearish mood, thereby supporting the safe-haven currency.
Despite an initial recovery in risk appetite during the European session, US markets remained tentative ahead of the Fed’s policy decision today amid concerns that the central bank may taper bond purchases.
As such, we may see the US Dollar rise in the run-up to the Fed’s decision today, with a tapering announcement likely to further boost USD. However, this may also cause some volatility as markets react, whatever the Fed decides.
Canadian Dollar (CAD) Softens amid Drop in Oil Prices
The Canadian Dollar (CAD) slipped against its stronger rivals yesterday as a drop in oil prices weighed on the commodity-linked currency.
CAD could recover today, as oil prices seem to be strengthening, however the Fed decision this evening could cause the ‘Loonie’ to lose some gains.
Australian Dollar (AUD) Firms as Risk Appetite Increases
The Australian Dollar (AUD) trended higher overnight, as an increased appetite for risk boosted the ‘Aussie’.
New Zealand Dollar (NZD) Climbs amid Risk-On Mood
The New Zealand Dollar (NZD) also ticked higher in overnight trade, supported by the slightly more bullish market mood.