Pound Surges Higher on BoE Rate Hike Bets

Pound (GBP) Strengthens on BoE Rate Hike Bets 

The Pound (GBP) surged higher through yesterday’s session, as bets for another Bank of England (BoE) rate hike at next month’s meeting picked up. According to data from the CME Group, investors have priced in an 82.5% chance of a further hike in February. 

In addition, as Omicron fears eased and the UK’s final manufacturing PMI printed higher than the flash estimate. 

With no new UK data out today, domestic Covid news could be the key driver of GBP exchange rates. 

Euro (EUR) Slips despite Upbeat German Data 

The Euro (EUR) lost ground yesterday, despite an unexpected rise in German retail sales and a better-than-forecast fall in German unemployment. 

The downside came as policy divergence between the European Central Bank (ECB) and both the BoE and the Federal Reserve weighed on the single currency. 

The Eurozone’s final services PMI this morning could cause some movement in the Euro, particularly if it differs from the preliminary results. 

US Dollar (USD) Struggles amid Risk-On Trade 

The US Dollar (USD) faced some selling pressure during yesterday’s session as an upbeat market mood saw investors shun the safe-haven ‘Greenback’. 

Additionally, the US ISM manufacturing PMI and JOLTs job openings reports printed below expectations, further dampening the appeal of the US Dollar. 

Looking ahead, this afternoon’s ADP employment change figures could boost the ‘Greenback’. USD investors will also be waiting for the latest meeting minutes from the Federal Open Market Committee (FOMC) this evening. 

Canadian Dollar (CAD) Has Mixed Success as Oil Edges Higher 

The oil-sensitive Canadian Dollar (CAD) firmed against its weaker rivals yesterday amid a modest uptick in crude prices. 

However, an unexpected slowdown in Canadian manufacturing activity limited CAD’s gains. 

Turning to today’s session, movements in the oil market could exert the most influence over the ‘Loonie’. 

Australian Dollar (AUD) Softens as Risk-On Mood Fades 

The risk-sensitive Australian Dollar (AUD) edged lower against many of its peers overnight as risk appetite eased off. 

New Zealand Dollar (NZD) Subdued amid Waning Appetite for Risk 

The New Zealand Dollar (NZD) also ticked lower in overnight trade as the market mood took a slightly bearish turn, thereby denting the appeal of the riskier ‘Kiwi’. 

Samuel Birnie

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