Pound Stumbles as Traders Rein in Rate Hike Bets

Pound (GBP) Remains Weak as Rate Hike Bets Fade

The Pound (GBP) slipped yesterday as markets reined in Bank of England (BoE) rate hike bets due to the UK’s cost-of-living crisis.

After some troubling UK economic data on Friday, economists expect a more cautious stance from the BoE at next week’s meeting. UK government bond yields, which often gauge rate hike expectations, have declined sharply so far this week.

The latest distributive trades data from the Confederation of British Industry (CBI) could add to GBP’s headwinds today. Economists expect another slip, and any poor data could add to the worrying outlook for the UK economy.

Euro (EUR) Muted amid Lack of Data

The Euro (EUR) was mixed yesterday as a lack of Eurozone economic data left the single currency to trade without a clear direction.

Meanwhile, EUR’s negative correlation to a stronger US Dollar (USD) prevented the Euro from making any meaningful gains against its weakening rivals.

A speech from European Central Bank (ECB) President Christine Lagarde early this evening could impact EUR. Recently, markets have started pricing in a third-quarter rate hike from the bank. Will Lagarde seek to stoke or stifle expectations?

US Dollar (USD) Continues Strength on Hawkish Fed

The US Dollar firmed yesterday as hawkish expectations from the Federal Reserve continue to underpin the ‘Greenback’.

In addition, a recovery in US durable goods orders may have supported USD, although the data did come in slightly below forecasts.

Amid a lack of notable US data today, risk sentiment may drive most movement in the safe-haven ‘Greenback’.

Canadian Dollar (CAD) Yo-yos with Oil Prices

The commodity-linked Canadian Dollar (CAD) traded primarily on oil price dynamics yesterday. CAD initially slipped as crude prices fell but managed to regain ground as crude recovered.

With no market-moving Canadian data on the cards for today, movements in the oil market may continue to control the ‘Loonie’.

Australian Dollar (AUD) Climbs as CPI Exceeds Expectations

The Australian Dollar (AUD) rose overnight after Australia’s latest CPI came in higher than forecast. Headline inflation rose to 5.1% year on year, up from 3.5% and exceeding expectations of 4.6%. This in turn increased the likelihood of a rate hike from the Reserve Bank of Australia (RBA) next week.

New Zealand Dollar (NZD) Wobbles amid Downbeat Market Mood

The risk-sensitive New Zealand Dollar (NZD) wavered sideways in overnight trade as a risk-off mood offset NZD’s positive correlation to AUD.

Samuel Birnie

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