Pound Sterling Choppy as Train Strikes Offset Hawkish BoE Comments

Pound Sterling (GBP) Wavers Lower amid UK Rail Strikes

The Pound (GBP) wobbled yesterday, ticking lower against its stronger peers, as recession fears offset some hawkish comments from Bank of England (BoE) Chief Economist Huw Pill.

Meanwhile, rail workers staged a walkout as soaring inflation continues to significantly outpace pay increases. The potential fallout from the strike added to UK economic concerns.

This morning, UK inflation edged up by 0.1 percentage point to hit a new 40-year high of 9.1%. The marginal increase seems to have dampened BoE rate rise bets, thereby denting Sterling, as investors thought the reading would exceed expectations.

Euro (EUR) Firms on Hawkish ECB Remarks

The Euro (EUR) gained ground yesterday as a positive tone among European investors lifted the single currency. In addition, European Central Bank (ECB) official Peter Kazimir said that the consensus among policymakers was that a half-point rate rise in September was ‘highly probable’. His hawkish tone helped boost EUR.

However, Russia-Ukraine concerns limited the upside. The Kremlin threatened to retaliate amid its row with Lithuania. Meanwhile, Denmark declared an ‘early warning’ over Russian gas supplies.

This afternoon, the latest flash consumer confidence report from the Eurozone could impact EUR. Will morale edge up, as economists expect?

US Dollar (USD) Edges Down amid Cautiously Upbeat Trade

The US Dollar (USD) fluctuated yesterday, trending lower overall, as the market mood unsteadily improved. This in turn diminished the appeal of the safe-haven ‘Greenback’.

Additionally, warnings that the US may be heading towards a recession may have put some pressure on USD. Overnight on Monday, Goldman Sachs upwardly revised their expectations for a US recession over the next year, with the bank now seeing a 30% probability of one occurring.

A handful of speeches from Federal Reserve officials this afternoon could cause some movement in USD. Investors will focus in particular on Fed Chair Jerome Powell’s congressional testimony. If Powell hints at further hawkish hikes, the US Dollar could climb.

Canadian Dollar (CAD) Wobbles despite Strong Sales Data

The Canadian Dollar (CAD) struggled for a clear direction yesterday, despite Canadian retail sales growing by a larger-than-forecast 0.9% in April.

Today, Canada’s inflation rate reading is in the spotlight. Economists expect inflation to jump by 0.6 percentage points in May. Such a rise could boost Bank of Canada (BoC) rate hike bets.

Australian Dollar (AUD) Falls on Inflation Fears

The Australian Dollar (AUD) fell overnight as a bearish tone in Asian markets dragged the risk-sensitive currency lower. Investors are once again worrying that central banks around the world will trigger a recession as they aggressively raise interest rates to cool piping-hot inflation.

New Zealand Dollar (NZD) Slides as Sentiment Sours

Likewise, the risk-tied New Zealand Dollar (NZD) declined in overnight trade as the downbeat market mood sapped demand for the ‘Kiwi’.

Samuel Birnie

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