Pound (GBP) Declines as Energy Costs Hits CO2 Production
The Pound (GBP) trended lower against the majority of its rivals yesterday as the potential impacts of soaring energy costs continued to worry GBP investors.
Surging gas prices forced CF Industries – one of the UK’s largest carbon dioxide suppliers – to pause production, raising fears over CO2 shortages. The gas is used in the food and drink industry, as well as in hospitals and nuclear power plants.
After a week of very little UK economic data, today is no different. Pound Sterling will therefore likely continue to be driven primarily by domestic factors, particularly today’s energy price cap rise from Ofgem, which could weigh on GBP.
Euro (EUR) Undermined as Gas Prices Continue to Climb
The Euro (EUR) softened yesterday, despite Germany’s latest GDP and business morale reports printing better than expected. European Central Bank (ECB) rate rise bets also failed to boost the single currency after the bank’s meeting accounts hinted at another 50-bp rise next month.
The downside in EUR came as gas prices continued to surge higher, with EU gas hitting a new all-time high. This stoked fears about the Eurozone’s energy crisis, which could tip the bloc into a recession.
The Euro may face some pressure this morning after German consumer confidence slumped to a fresh record low. Later on, the Euro’s negative correlation with the US Dollar (USD) could come into play, as there is the potential for some big swings in USD.
US Dollar (USD) Upside Muted ahead of Fed Chief Speech
The US Dollar fluctuated yesterday, heading higher against many of its peers overall, as USD investors seemed hesitant ahead of today’s speech from Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium.
Yesterday’s raft of US data gave the ‘Greenback’ a lift, with GDP and corporate profits printing better than expected. However, the caution ahead of Powell’s potentially market-rocking speech today seemed to cap gains.
Today’s speech gives the Fed chief a chance to reset market expectations for interest rate rises over the coming months. If Powell signals that the US central bank will continue its aggressive tightening cycle, the US Dollar could soar.
Canadian Dollar (CAD) Trades Narrowly amid Mixed Data
The Canadian Dollar (CAD) traded without a clear direction yesterday as mixed Canadian data and muted movement in the oil markets kept CAD in a tight range.
With no notable Canadian data due out today, crude prices could drive the oil-linked ‘Loonie’.
Australian Dollar (AUD) Rally Fizzles Out
The Australian Dollar (AUD) retreated from recent highs in overnight trade as a mixed market mood took the wind out of AUD’s sails.
New Zealand Dollar (NZD) Ticks Lower as Caution Sets In
The New Zealand Dollar (NZD) also headed lower overnight, despite an unexpected rise in New Zealand consumer confidence, as investors grew cautious ahead of today’s speech from the Fed’s Powell.