Pound (GBP) Muted amid Recession Warnings
The Pound (GBP) remained subdued at the end of last week as the UK’s economic troubles and political instability continued to worry GBP investors.
While Goldman Sachs and the Bank of England (BoE) have warned that the UK will enter a recession this year, the British Chambers of Commerce (BCC) warned on Thursday night that the country is already in one.
Today the final UK services PMI could impact the Pound, but the focus is on the results of the Tory leadership election. Markets may be relieved that the UK finally has an active Prime Minister, particularly amid reports that Liz Truss – the favourite to win – may freeze energy bills. However, there are also fears that Truss’s economic policies may make inflation worse.
Euro (EUR) Capped by Russian Gas Warnings
The Euro (EUR) initially firmed on Friday at European gas prices continued to fall, easing fears about an energy-driven recession in the Eurozone.
However, warnings from Russia may have trimmed EUR’s gains. The Kremlin said that it would completely cut off supplies if the EU tried to impose a price cap on gas, while also hinting at ongoing disruption through the Nord Stream 1 pipeline.
News on Friday evening that Gazprom shut down the Nord Stream pipeline indefinitely could weigh on the Euro this week. Soaring energy prices could hammer the Eurozone economy and sow discord within EU democracies.
US Dollar (USD) Slips amid Risk-On Mood
The US Dollar (USD) stumbled on Friday as an upbeat market mood saw a drop in demand for the safe-haven currency.
US data in the afternoon triggered further losses. Strong US employment figures further cheered markets while signs that wage-driven inflation was cooling dampened Federal Reserve rate rise bets.
Turing to the week ahead, US data is rather thin on the ground. Tomorrow’s ISM services PMI could have a big impact on USD. Otherwise, risk appetite may drive this week’s movement.
Canadian Dollar (CAD) Enjoys Rise in Crude
The oil-linked Canadian Dollar (CAD) found some success on Friday as crude prices recovered from Thursday night’s lows. However, once oil hit $88 a barrel it wavered sideways, thereby capping CAD’s gains.
With Canadian data in short supply at the start of this week, crude prices could continue to drive the ‘Loonie’. At the time of writing oil is ticking higher, which could give CAD a lift today.
Australian Dollar (AUD) Wavers amid Positive Data and Risk Aversion
The risk-sensitive Australian Dollar (AUD) fluctuated in a narrow range in overnight trade as a bearish market mood offset stronger-than-expected Australian and Chinese data releases.
New Zealand Dollar (NZD) Trades Sideways Alongside AUD
Likewise, the New Zealand Dollar (NZD) moved sideways overnight, trading true to its positive correlation with the ‘Aussie’ Dollar.