Markets Eerily Calm following Pound’s Collapse

Pound (GBP) Subdued as Money Markets Stabilise

The Pound (GBP) was fairly muted yesterday as UK markets took a breather following the recent extreme volatility, which was triggered by concerns over the government’s unfunded fiscal plans.

A speech from Bank of England (BoE) Chief Economist Huw Pill and a meeting between Chancellor Kwasi Kwarteng and top City bankers yielded no new developments, leaving Sterling to trade in a narrow range.

Turning to today, GBP traders remain focused on the UK’s credibility crisis. In a rare rebuke, the International Monetary Fund (IMF) has urged the Chancellor to rethink his mini-budget. With investors losing confidence in the British government’s approach to fiscal policy, the Pound will likely remain on the defensive.

Euro (EUR) Muted amid Gas Pipeline Leaks

The Euro (EUR) was mixed during yesterday’s session as ongoing concerns about the Russia-Ukraine war offset a modestly upbeat mood in European markets.

Adding to fears about Europe’s energy security, large gas leaks were detected in the Nord Stream pipeline – a key gas artery into Europe. Politicians from Ukraine and Poland blamed Russia for sabotaging the offshore lines, after Swedish and Danish seismologists registered underwater explosions prior to the leaks.

This morning, German consumer confidence fell more than forecast, hitting a record low for the fourth consecutive month. This could weigh on EUR through the first part of the session.

US Dollar (USD) Stays Strong amid Positive US Data

The US Dollar (USD) was fairly quiet yesterday, initially retreating further from recent 20-year highs as the market mood improved.

However, a slight turnaround in risk sentiment supported the safe-haven ‘Greenback’ later in the session, as did better-than-expected US durable goods orders and consumer confidence.

Looking ahead, today brings speeches from a handful of Federal Reserve officials. Potentially the most impactful speaker will be Fed Chair Jerome Powell. If the US central bank chief continues to strike a hawkish tone, USD could gain some ground.

Canadian Dollar (CAD) Edges Lower despite Oil Recovery

The oil-sensitive Canadian Dollar (CAD) softened against its stronger peers yesterday. Although crude prices inched higher, they remained close to the nine-month low touched on Monday night.

Canadian data remains in short supply today. As a result, movements in the oil market will likely continue to influence the ‘Loonie’.

Australian Dollar (AUD) Slides amid Risk Aversion

The Australian Dollar (AUD) fell sharply overnight as a bearish market mood dragged the risk-sensitive ‘Aussie’ lower.

New Zealand Dollar (NZD) Drops amid Gloomy Market Mood

The risk-linked New Zealand Dollar (NZD) also fell during last night’s trade as sentiment soured.

Samuel Birnie

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