Pound (GBP) Gains as BoE Policymaker Boosts Rate Rise Bets
The Pound (GBP) strengthened yesterday off the back of some hawkish comments from outgoing Bank of England (BoE) policymaker Michael Saunders.
Saunders stated that was not ‘unlikely’ that the Bank Rate would exceed 2% over the next year, adding that ‘the tightening cycle may still have some way to go’. The prospect of increasingly higher interest rates boosted Sterling.
Earlier this morning, the UK’s latest labour report showed a mixed picture. The unemployment rate held steady, beating expectations of a rise from 3.8% to 3.9%. However, average earnings continue to lag behind inflation. As a result, Sterling may make limited gains today.
Euro (EUR) Firms as USD Sell-Off Continues
The Euro (EUR) rose against the majority of its peers yesterday, benefitting from its negative correlation to the US Dollar (USD) as the latter currency retreated.
EUR also seemingly caught some bids ahead of the European Central Bank (ECB) interest rate decision on Thursday. Markets expect the bank to raise rates by 25 basis points – its first hike since 2011 – while perhaps signalling a steeper rise in September.
This morning, the Eurozone’s final inflation rate reading could affect EUR exchange rates. If it confirms a sharp jump in inflation last month, the Euro could climb.
US Dollar (USD) Falls as Markets Scale Back Rate Rise Expectations
The US Dollar extended its downside yesterday as markets continue to pare bets for a 100-bp rate rise at the Federal Reserve’s next meeting. This comes after multiple Fed officials voiced opposition to such a large hike.
This, in turn, helped put some bullish energy into markets, further undermining the safe-haven US Dollar.
This evening, Fed Vice Chair Lael Brainard is due to speak. If she echoes her colleagues’ opposition to a bumper rate rise, USD could slip further.
Canadian Dollar (CAD) Stumbles despite Rising Oil Prices
The oil-tied Canadian Dollar (CAD) fell against the majority of its peers yesterday, despite a rise in crude prices.
Could movements in the oil market have a stronger effect on the ‘Loonie’ today?
Australian Dollar (AUD) Jumps following RBA Minutes
The Australian Dollar (AUD) strengthened overnight following hawkish meeting minutes from the Reserve Bank of Australia (RBA). The minutes reveal that further rate increases are likely, while policymakers sounded upbeat about the Australian economy’s ability to withstand higher borrowing costs.
New Zealand Dollar (NZD) Rises on AUD Correlation
The New Zealand Dollar (NZD) also rose in overnight trade as the ‘Kiwi’ enjoyed its positive correlation to the ‘Aussie’ Dollar.