Pound and Euro Rise despite Choppy Trade

Pound (GBP) Recovery Undermined by BoE’s Saunders 

The Pound (GBP) rose sharply yesterday, buoyed by some dip-buying and relief that Russian President Vladimir Putin did not declare all-out war on Ukraine during his Victory Day speech. 

However, Sterling slipped in the afternoon following a speech from Bank of England (BoE) policymaker Michael Saunders. Saunders, who voted for a 50-bps rate rise at the recent meeting, warned that the UK’s economic outlook may be even darker than the bank forecast last week. Still, Sterling held some of its daily gains. 

This morning, the British Retail Consortium’s latest retail sales report could cause headwinds for the Pound. Year on year, sales contracted by 1.7% in April, worse than was forecast. Although the data came out overnight, it provides further evidence that the cost-of-living crisis is hitting UK consumer spending. 

Euro (EUR) Firms following Putin Speech 

The Euro (EUR) firmed against many of its peers yesterday as Putin’s decision not to announce an escalation of his invasion of Ukraine cheered EUR investors. 

EUR found its upside limited, however. The latest Sentix index of investor confidence in the Eurozone fell for the third consecutive month, hitting a near two-year low. This weighed on the single currency, capping its gains. 

Today, Germany’s ZEW economic sentiment index is in focus. Will another drop dent EUR exchange rates? 

US Dollar (USD) Stays Strong despite Profit-Taking 

The US Dollar (USD) softened early in yesterday’s session, suffering from some profit-taking after the US Dollar Index hit a two-decade high. 

The ‘Greenback’ then bounced back in the afternoon, as a bearish market mood boosted support for the safe-haven currency. 

A handful of Federal Reserve speeches today could affect USD. Will any of the policymakers hint at the possibility of 75-bps rate rise? 

Canadian Dollar (CAD) Slips as Oil Retreats 

The Canadian Dollar (CAD) fell against many of its counterparts yesterday as declining oil prices dragged on the commodity-linked currency. 

With Canadian data thin on the ground today, movements in the oil market may continue to drive the Canadian Dollar. 

Australian Dollar (AUD) See-Saws as Market Mood Shifts 

The Australian Dollar (AUD) wavered in overnight trade as a shifting market mood saw the riskier ‘Aussie’ dip and then recover. In addition, a slightly lower-than-expected business confidence reading kept a lid on AUD. 

New Zealand Dollar (NZD) Rebounds as Risk Appetite Improves 

Likewise, the New Zealand Dollar (NZD) initially slipped overnight before a bullish turn in markets helped the risk-sensitive ‘Kiwi’ recover. 

Samuel Birnie

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