Pound (GBP) Firms as Peace Plan Lifts Investors’ Spirits
The Pound (GBP) was somewhat muted yesterday morning, despite comments from Russian and Ukrainian diplomats suggesting that peace talks were making headway.
However, news of ‘significant progress’ on a tentative 15-point peace plan in the afternoon raised hopes even higher, boosting the risk-sensitive Pound against most of its peers.
Today, the Bank of England (BoE) interest rate decision is in the spotlight. Markets expect the bank to raise rates from 0.5% to 0.75%, which could support Sterling. Investors will also be anxious to learn how the BoE expects the Ukraine war to impact monetary policy in the future.
Euro (EUR) Capped as Fed Decision Looms
The Euro (EUR) found mixed success yesterday as the rising hopes for peace in Ukraine gave the single currency a boost.
However, with the Federal Reserve rate decision looming, EUR struggled against some of its stronger rivals. The Euro’s negative correlation with the US Dollar (USD) and policy divergence between the Fed and the European Central Bank (ECB) weighed on EUR sentiment.
A few speeches from ECB officials today could impact EUR, particularly this morning’s speech from the central bank’s president, Christine Lagarde. Will policy divergence keep the pressure on the single currency?
US Dollar (USD) Slips amid Cheery Market Mood
The US Dollar fell against most of its rivals through yesterday’s session as a risk-on tone sapped demand for the safe-haven currency. Markets were cheery after China hinted at new economic support and Russia-Ukraine peace talks made progress.
In addition, weaker-than-expected US retail sales figures failed to offer the ‘Greenback’ any support.
The US Dollar then rose sharply in the run-up to the Fed decision, only to tumble after the US central Bank hiked rates by 25 basis points. This could have been a ‘buy the rumour, sell the news’ situation, while some investors may have been disappointed that the rate rise wasn’t more aggressive.
Looking ahead, the latest initial jobless claims data could impact USD this afternoon.
Canadian Dollar (CAD) Falls despite Hot CPI
The Canadian Dollar (CAD) dipped yesterday, despite Canada’s CPI printing higher than expected, hitting a fresh 30-year high of 5.7%. Although this could prompt the Bank of Canada (BoC) to act more aggressively in the coming months, CAD nevertheless weakened.
A lack of Canadian economic data today could leave the ‘Loonie’ vulnerable to losses.
Australian Dollar (AUD) Rises as Unemployment Falls
The risk-sensitive Australian Dollar (AUD) gained ground overnight as an upbeat market mood and strong Australian jobs data boosted the ‘Aussie’. Australia’s unemployment rate dropped from 4.2% to 4%, beating expectations by 0.1 percentage points.
New Zealand Dollar (NZD) Undermined by GDP Data Miss
The New Zealand Dollar (NZD) traded mostly sideways overnight as New Zealand’s GDP growth rate printed below forecasts, offsetting the risk-on mood.