Pound (GBP) Slides following Cautious BoE Comments
The Pound (GBP) initially made gains yesterday morning. However, Sterling fell sharply as markets responded to the Bank of England’s (BoE) Treasury Select Committee hearing.
BoE Governor Andrew Bailey warned that the UK is still likely to enter a recession. In addition, policymaker Silvana Tenreyro advocated a slower pace of tightening. Markets pared back BoE rate rise bets in response, which caused a drop in GBP.
Today, PM Liz Truss will announce her energy crisis spending package, along with other policy interventions. If Truss’s plans are underwhelming, the Pound may remain subdued. But if they represent a decisive and effective response to the current crisis, Sterling could climb.
Euro (EUR) Firms as GDP Boosts Rate Hike Bets
The Euro (EUR) strengthened yesterday after the Eurozone’s GDP growth rate exceeded previous estimates, printing at 0.8% versus 0.6%.
Ahead of the European Central Bank’s (ECB) interest rate decision today, the strong GDP data boosted bets for a steeper 75-bp hike. This in turn saw the Euro rise against many of its peers.
We could see some volatility in the single currency today as markets digest the ECB decision. A larger rate rise could boost the Euro. However, cautious remarks from ECB President Christine Lagarde could cap the upside.
US Dollar (USD) Wavers at Multi-Year Highs
The US Dollar (USD) fluctuated at near multi-year highs yesterday as a lack of major trading impulses left the ‘Greenback’ unable consolidate its gains.
Meanwhile, a generally downbeat market mood and ongoing expectations for Federal Reserve interest rate rises underpinned the US Dollar, preventing any notable losses.
Looking ahead, a speech from Fed Chair Jerome Powell this afternoon could help the US Dollar test recent highs if the central bank chief maintains his hawkish tone.
Canadian Dollar (CAD) Wavers amid Oil Volatility
The Canadian Dollar (CAD) fluctuated yesterday as volatility in the oil markets impacted the crude-linked currency. Meanwhile, the Bank of Canada’s (BoC) vague forward guidance had little effect on the ‘Loonie’. Policymakers hinted at more rate hikes to come but perhaps at a slower pace.
With no Canadian data due out today, CAD could trade primarily on oil price dynamics.
Australian Dollar (AUD) Slips on Trade Data and Dovish RBA
The Australian Dollar (AUD) wavered lower overnight as a surprise slump in exports and dovish comments from Reserve Bank of Australia (RBA) Governor Philip Lowe dented the ‘Aussie’.
New Zealand Dollar (NZD) Falls amid Risk Aversion
The New Zealand Dollar (NZD) also weakened in overnight trade as a downbeat market mood weighed on the risk-sensitive ‘Kiwi’.