Government’s Energy Bill Bailout Fails to Support the Pound

Pound (GBP) Spikes and Slumps amid Energy Support Announcement

The Pound (GBP) spiked yesterday as Prime Minister Liz Truss announced the government’s Energy Price Guarantee – Truss’s flagship spending package to tackle the UK’s energy bill crisis. Commentators welcomed the news as it should help to shore up the country’s struggling economy.

However, Truss’s plans were not costed, raising concerns that the package – which could cost around £180bn – could damage the economy in the long run. Critics also argued that the plan was inefficient and expensive, and that more targeted support would have been cheaper and more effective.

With no UK data due out today, Sterling may continue to trade on the response to Truss’s energy bill bailout.

Euro (EUR) Slips despite Hawkish ECB Hike

The Euro (EUR) initially ticked higher yesterday as markets anticipated a large 75-bp interest rate rise from the European Central Bank (ECB).

The ECB did indeed hike by 0.75%, but it also slashed its growth forecasts for 2023. Christine Lagarde, the bank’s President, warned of a ‘really dark downside scenario’ in which the Eurozone falls into a recession and countries need to ration gas. These fears weighed heavily on EUR.

Turning to today, Eurozone economic data is thin on the ground. As a result, the Euro could trade primarily on EU gas prices and the currency’s negative correlation to the US Dollar (USD).

US Dollar (USD) Undermined by Upbeat Mood

The US Dollar (USD) ticked lower in early trade yesterday as a fairly upbeat mood in European markets drew investors away from the safe-haven currency.

The ‘Greenback’ rallied against its weaker peers later on following hawkish comments from Federal Reserve Chair Jerome Powell. However, the upbeat mood persisted into the afternoon, causing USD to waver against its stronger rivals.

A trio of Fed speeches later in the day could impact the US Dollar. Will more hints of further rate rises boost the ‘Greenback’?

Canadian Dollar (CAD) Wavers Higher as Oil Strengthens

The crude-linked Canadian Dollar (CAD) fluctuated yesterday, trending upwards against many of its peers, as oil prices wavered higher.

Looking ahead, the latest Canadian employment data could influence CAD today. Could an expected rise in the unemployment rate dent the ‘Loonie’?

Australian Dollar (AUD) Strengthens amid Improving Market Mood

The Australian Dollar (AUD) marched higher in overnight trade as a cheery market mood boosted the risk-sensitive currency.

New Zealand Dollar (NZD) Firms in Risk-Positive Trade

Likewise, the New Zealand Dollar (NZD) made gains overnight as the risk-on tone supported the ‘Kiwi’.

Samuel Birnie

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