Pound Slumps as BoE Predicts UK Recession

Pound (GBP) Plunges as UK Set for Recession

After rising in the morning, the Pound (GBP) slumped yesterday afternoon following the Bank of England’s (BoE) interest rate decision, despite a 0.5% rate rise. The sharp sell-off came as the BoE forecast a UK recession starting in the fourth quarter of this year and persisting throughout 2023.

Sterling managed to regain some ground late in the afternoon, seemingly attracting some dip-buying after entering oversold conditions.

Sterling may spend today’s session licking its wounds. Movement could be limited as there’s no notable UK economic data due out.

Euro (EUR) Rises in Cheery European Trade

The Euro (EUR) trended higher yesterday as a mostly upbeat mood in European markets buoyed the single currency.

Meanwhile, the European Central Bank’s (ECB) latest economic bulletin may have provided EUR with some support. Compared with the BoE’s bleak forecasts, the ECB’s outlook for the Eurozone is relatively bright.

German industrial production unexpectedly improved this morning, which may give EUR a lift. Later on, some high-impact US data could affect the Euro due to EUR’s negative correlation with the US Dollar (USD).

US Dollar (USD) Bolstered by Fed Rate Rise Bets

The US Dollar wavered yesterday as risk sentiment shifted. European markets initially opened higher but sentiment soured as the day went on, which boosted the safe-haven ‘Greenback’.

In addition, Federal Reserve rate hike bets underpinned the US Dollar. After cautious comments following last week’s Fed meeting, many policymakers have now reiterated their commitment to lowering inflation.

Today’s jobs data is in focus for USD investors. Any signs that the labour market is cooling could dent USD, while robust readings will further fuel Fed rate rise bets.

Canadian Dollar (CAD) Declines as Oil Falls below $90

The commodity-linked Canadian Dollar (CAD) weakened yesterday as oil prices continued to decline, with WTI crude dropping below $90 a barrel.

Oil has recovered this morning, which may support the ‘Loonie’. Looking ahead, Canada’s latest unemployment rate could drag CAD back down as economists forecast a rise of 0.1 percentage points.

Australian Dollar (AUD) Capped by RBA Growth Downgrade

The Australian Dollar (AUD) traded sideways overnight, despite a risk-on market mood, after the Reserve Bank of Australia (RBA) downgraded its economic growth forecasts.

New Zealand Dollar (NZD) Flat ahead of US Jobs Data

Likewise, the New Zealand Dollar (NZD) was muted in overnight trade as markets brace for today’s US jobs data.

Samuel Birnie

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