Pound (GBP) Soars as Traders Reposition
The Pound (GBP) strengthened against the majority of its rivals yesterday as traders shrugged off last week’s dovish tilt from the Bank of England (BoE) and continued to price in rate hikes ahead of today’s CPI.
Mixed public borrowing figures may also have boosted GBP. Although the budget deficit printed higher than markets expected, government borrowing for this financial year is on course to print below government forecasts. This raised hopes ahead of the spring budget today.
Sterling slipped this morning as UK inflation jumped sharply higher, fuelling fears about the UK’s cost-of-living crisis. GBP investors will now be looking ahead to the spring statement to see what Chancellor Rishi Sunak will do to tackle the squeeze on household income.
Euro (EUR) Directionless as Russia-Ukraine Talks Stall
The Euro (EUR) was mixed yesterday as peace talks between Russia and Ukraine seem to have stalled, leaving EUR investors in limbo.
Meanwhile, a weaker US Dollar (USD) may have cushioned the single currency’s losses thanks to the negative correlation between EUR and USD.
The Eurozone’s consumer confidence indicator for March could cause some movement this afternoon. Will the war in Ukraine cause a slump in morale, thereby denting the Euro?
US Dollar (USD) Falls amid Upbeat Trade
The safe-haven US Dollar faced selling pressure yesterday as a risk-on mood swept markets.
Recent hawkish comments from Federal Reserve officials have helped to cushion USD’s downside. However, with markets now judging that tighter monetary policy is needed, investors remain upbeat.
Risk appetite may remain the dominant driver of USD movement today. In addition, two more Fed speeches, including one from Fed Chair Jerome Powell, could support the ‘Greenback’.
Canadian Dollar (CAD) Dips as Oil Prices Retreat
The Canadian Dollar (CAD) lost ground yesterday as oil prices wavered lower, thereby dampening the appeal of the commodity-linked ‘Loonie’.
With market-moving Canadian data still thin on the ground today, movements in the oil market could affect CAD exchange rates.
Australian Dollar (AUD) Wavers as Risk-On Rally Fades
The Australian Dollar (AUD) was mixed in overnight trade as a tepid market mood caused the risk-sensitive ‘Aussie’ to waver. Further Covid lockdowns in China dampened the recent risk-on rally.
New Zealand Dollar (NZD) Slips as Sentiment Sours
The New Zealand Dollar (NZD) fared worse overnight as worries about the impact of Covid restrictions on China’s economy weighed on the riskier ‘Kiwi’.