ECB Decision Sees Euro Slump while Pound and US Dollar Soar

Pound (GBP) Soars despite Economic Concerns

The Pound (GBP) surged higher yesterday, without a clear catalyst for the movement. The strength came despite recent cuts to the UK’s economic growth forecasts.

It seems as though Sterling may have benefited from some cross-driven strength after the Euro (EUR) suffered a sell-off. In addition, a pickup in UK consumer confidence may have helped the Pound somewhat.

This morning, new employment data shows that staff hiring in the UK is slowing. This could further indicate that the country’s economic recovery is losing steam, thereby weighing on Sterling.

Euro (EUR) Slumps following ECB Decision

The Euro initially spiked yesterday after the European Central Bank (ECB) decision. The ECB signalled a 25-bps rate rise in July with the potential for a 50-bps hike at its September meeting.

This hawkish announcement initially boosted EUR. However, the ECB also sharply downgraded its growth projections for 2022 and 2023. And, despite the hawkish signals, the ECB still lags behind its global counterparts. As a result, EUR exchange rates slumped.

Later this afternoon, a speech from ECB President Christine Lagarde could impact EUR.

US Dollar (USD) Enjoys EUR Sell-Off

The safe-haven US Dollar (USD) jumped against many of its peers in yesterday’s session as the ECB’s rate rise plans dampened risk appetite.

Additionally, the sharp drop in EUR seems to have boosted USD. As EUR/USD is the most traded currency pair, the ‘Greenback’ benefitted as investors ditched the single currency.

Today, the latest US CPI could cause some movement. If inflationary pressures continue to ease then this could dampen Federal Reserve rate rise bets, which may weigh on USD.

Canadian Dollar (CAD) Dented by BoC Warning

The Canadian Dollar (CAD) slipped against its stronger peers yesterday after the Bank of Canada (BoC) warned of increased financial stability risks.

Looking ahead, Canada’s latest employment data is in focus. Economists expect the unemployment rate to hold at 5.2%. Any surprises could significantly impact CAD exchange rates.

Australian Dollar (AUD) Firms as Risk Appetite Returns

After trading mostly sideways overnight, the Australian Dollar (AUD) started edging higher towards the end of the Asian session. The upside came as stability returned to markets, supporting the risk-sensitive ‘Aussie’.

New Zealand Dollar (NZD) Rises amid Risk-On Trade

Likewise, the New Zealand Dollar (NZD) gained ground in overnight trade as a bullish mood boosted the riskier ‘Kiwi’.

Samuel Birnie

Contact Samuel Birnie


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