Pound Bounces off Monthly Lows on Rate Hike Expectations

Pound (GBP) Jumps on Hawkish BoE 

The Pound (GBP) surged yesterday, finding renewed support as the Bank of England (BoE) struck a hawkish tone in its latest monetary policy meeting. 

While policy remains unchanged, a two-seven split on the quantitative easing vote and talk of tapering in the near future boosted GBP, with City traders expecting a rate hike in March 2022. 

Turning to today, the Confederation of British Industry’s distributive trades report is expected to drop to 35, though this would still be a positive reading and could support GBP. 

Euro (EUR) Slips amid Disappointing PMIs 

The Euro (EUR) struggled through yesterday’s session as both the Eurozone’s and Germany’s PMIs missed market forecasts. 

In addition, political jitters ahead of Germany’s general election this weekend are also putting pressure on the single currency, with EUR investors anxious amid the uncertainty. 

Looking ahead, the Ifo business climate indicator for Germany is expected to fall again this morning, with economists expecting the gauge to hit a five-month low. This could further dent EUR. 

US Dollar (USD) Sheds Fed-Fuelled Gains 

The US Dollar (USD) fell yesterday as a risk-on market mood and disappointing data saw the ‘Greenback’ lose the gains it made following the Federal Reserve decision on Wednesday evening. 

Initial jobless claims in the US unexpectedly rose last week, while the country’s Markit PMIs both missed expectations, adding to USD’s downside. 

Later this afternoon, Federal Reserve Chair Jerome Powell is due to speak. Will any hawkish comments help the US Dollar regain some ground? 

Canadian Dollar (CAD) Climbs as Oil Prices Rise

The Canadian Dollar (CAD) strengthened against most of its rivals yesterday as oil prices boosted the commodity-linked currency, with WTI crude jumping by $1.75 a barrel. 

In addition, a smaller-than-expected contraction in Canadian retail sales may have encouraged CAD investors, with the data printing at -0.6% rather than -1.2%. 

Australian Dollar (AUD) Softens as Market Sentiment Sours 

The Australian Dollar (AUD) trended lower in overnight trade as a slightly more bearish mood weighed on the risk-sensitive currency. 

New Zealand Dollar (NZD) Down amid Risk-Off Mood 

The New Zealand Dollar (NZD) also ticked lower overnight, with demand for the ‘Kiwi’ dented by a shift in risk appetite.