Pound (GBP) Gains as BoE Raises Interest Rates
The Pound (GBP) jumped yesterday after the Bank of England (BoE) surprised markets by raising interest rates to 0.25%.
However, concerns over the Omicron variant’s economic impact, fuelled by a troubling PMI report, significantly limited Sterling’s gains.
This morning, UK retail sales beat forecasts for November, but ongoing Covid fears may offset the positive data.
Euro (EUR) Edges Lower on Dovish ECB
The Euro (EUR) trended lower yesterday as the European Central Bank (ECB) took a more dovish stance than its British and American counterparts.
The ECB left interest rates unchanged but announced plans to end its pandemic emergency purchase programme (PEPP) in March. The bank also said it would temporarily increase its regular bond-buying to cushion the end of PEPP.
However, EUR’s losses were limited. This is perhaps due to investor confidence that the ECB is taking the right approach to its monetary policy by cautiously preparing for a taper.
Turning to today, EUR may face headwinds as Germany’s Ifo business climate indicator fell for the sixth consecutive month.
US Dollar (USD) Muted as Investors Unfazed by Hawkish Fed
The US Dollar (USD) was subdued yesterday, ticking lower against many of its rivals, despite the Federal Reserve’s hawkish decision to accelerate its tapering plans on Wednesday.
It seems as though expectations of a faster tightening of monetary policy were already priced into USD, leaving the ‘Greenback’ with nowhere to go.
A lack of significant US data today may leave the US Dollar without a clear direction, although a souring market mood might give it a boost.
Canadian Dollar (CAD) Wavers amid Oil Volatility
The Canadian Dollar (CAD) experienced some volatility yesterday as oil prices fluctuated by almost $2.
However, CAD was supported by Canada’s latest ADP employment change figures, which smashed forecasts of 27,000 to print at 231,800.
With no market-moving Canadian data out today, crude prices could drive the most movement in the oil-linked ‘Loonie’.
Australian Dollar (AUD) Down amid Drop in Business Confidence
The Australian Dollar (AUD) fell overnight after Australian business confidence unexpectedly slumped to -23.2 this month.
New Zealand Dollar (NZD) Slips as Market Sentiment Sours
The New Zealand Dollar (NZD) also weakened in overnight trade as a downbeat market mood weighed on the risk-sensitive ‘Kiwi’.