Pound (GBP) Fluctuates amid Reports of Spending Plan
The Pound (GBP) experienced some volatility yesterday, initially gaining some ground as investors cheered the news that new UK Prime Minister Liz Truss will introduce a huge spending package to protect the country from soaring energy bills.
However, Sterling pared its gains in the afternoon. Concerns about surging government borrowing costs spooked GBP investors, with UK bond yields hitting their highest levels since December 2013.
Political news could continue to drive the Pound today, with speculation ahead of tomorrow’s expected policy announcement potentially causing volatility. In addition, Bank of England (BoE) policymakers are due to testify to MPs today. Their comments could trigger movement.
Euro (EUR) Dips despite Gas Price Pullback
After a brief uptick amid falling EU gas prices, the Euro (EUR) slipped to weekly lows against many of its peers yesterday. Despite the pullback in energy prices, EUR investors remain fearful of an energy-driven recession in the Eurozone following the cut-off of Nord Stream gas supplies.
The single currency clawed back some losses in the afternoon, perhaps attracting some dip-buying. However, EUR remained muted.
Today, the third estimate for second-quarter Eurozone GDP growth could affect EUR, if it deviates from previous estimates. Comments from European Central Bank (ECB) policymakers could also have an impact. Otherwise, energy prices could determine the Euro’s movement.
US Dollar (USD) Firms as US Trade Resumes
The US Dollar (USD) strengthened yesterday as American trade returned following Monday’s federal holiday. A generally downbeat mood and Federal Reserve rate rise bets underpinned the safe-haven ‘Greenback’.
An unexpected improvement in ISM’s US services PMI may have capped USD’s gains. While the survey showed the strongest service-sector growth since April, it also revealed that prices rose at the slowest pace since January 2021, thereby cooling Fed rate hike bets.
Risk appetite may drive the US Dollar through most of today’s session. Later this evening, a handful of Fed speeches could prompt some movement. Will US central bank policymakers support USD by striking a hawkish tone?
Canadian Dollar (CAD) Ticks Higher despite Drop in Crude
The commodity-linked Canadian Dollar (CAD) firmed yesterday, despite a drop in crude prices, as North American markets reopened following the Labor Day holiday.
Today, the Bank of Canada (BoC) interest rate decision is in focus. Markets expect a 75-bp interest rate rise. Any hints that the central bank could ease its future tightening plans may weigh on CAD.
Australian Dollar (AUD) Falls following Weak Data
The Australian Dollar (AUD) weakened overnight after Australia’s GDP growth rate printed slightly below forecasts and China’s latest trade data massively disappointed markets.
New Zealand Dollar (NZD) Down as Sentiment Sours
The New Zealand Dollar (NZD) also fell in overnight trade as a downbeat market mood weighed on the risk-sensitive ‘Kiwi’.