Pound (GBP) Falls on Recession Fears
The Pound (GBP) fell yesterday, hitting fresh multi-year lows against some of its peers, as markets digested a downbeat report from a team of Goldman Sachs economists.
In a note published on Monday, Goldman warned that UK inflation could hit 22% next year if energy prices continue to soar. The bank also expects the UK to slip into a recession in the fourth quarter of this year, matching the Bank of England’s (BoE) gloomy forecasts.
In the absence of UK data today, GBP investors may focus on the UK’s economic woes and the Tory leadership election. The ongoing instability could keep the Pound on the defensive.
Euro (EUR) Rises amid Energy Price Pullback
The Euro (EUR) strengthened yesterday as EUR investors cheered the news that the EU will stage an ‘emergency intervention’ to tackle soaring energy costs.
However, a larger-than-forecast fall in Eurozone economic sentiment may have capped EUR’s gains. In addition, the Euro also found its upside limited by its negative correlation to a strengthening US Dollar (USD).
Today, the Eurozone’s latest flash inflation rate is in focus. If inflation beats forecasts, like Germany’s did yesterday, EUR could climb.
US Dollar (USD) Rebounds on Fed Rate Rise Bets
The US Dollar initially softened yesterday as an upbeat mood among European investors sapped the safe-haven currency’s strength.
However, hawkish comments from the Federal Reserve’s Tom Barkin and strong US economic data helped boost Fed rate hike bets in the afternoon. The ‘Greenback’ subsequently strengthened.
A speech from Fed policymaker Loretta Mester could inspire similar movement today if she echoes Barkin’s hawkish tone. In addition, the ADP employment change figures may provide fresh impetus.
Canadian Dollar (CAD) Dented by Drop in Oil Prices
The Canadian Dollar (CAD) weakened yesterday as the crude-linked ‘Loonie’ suffered a sharp drop in oil prices.
Today, CAD investors will likely focus on the latest Canadian GDP data. Could ongoing expansion in Canada’s economy boost the ‘Loonie’?
Australian Dollar (AUD) Buoyed by Chinese PMIs
The Australian Dollar (AUD) recovered in overnight trade as both China’s manufacturing and service-sector NBS PMI reports beat expectations. As AUD often trades as a proxy for the Chinese economy, this lifted the ‘Aussie’.
New Zealand Dollar (NZD) Enjoys AUD Correlation
The New Zealand Dollar (NZD) made very modest gains overnight as the ‘Kiwi’ enjoyed its positive correlation to the Australian Dollar.