Pound (GBP) Extends Rally as UK Markets Recover
The recovery in the Pound (GBP) continued yesterday following Monday’s policy U-turn from Chancellor Kwasi Kwarteng and evidence that the Bank of England’s (BoE) bond market intervention last week is working.
Confusion over the government’s forthcoming fiscal plans may have limited Sterling’s gains, however. Kwarteng dismissed reports that he would publish his plans for cutting government debt a month earlier than anticipated in a bid to reassure markets. This caused some turbulence in GBP, but Sterling was strong enough to retain its gains.
Turning to today, news about UK fiscal policy could continue to influence the Pound. In the meantime, the country’s final services PMI results may also cause some movement. The flash estimate pointed to a surprise contraction. Could the finalised score beat expectations?
Euro (EUR) Firms as Inflationary Pressures Persist
The Euro (EUR) strengthened yesterday after the Eurozone’s latest PPI reading exceeded forecasts, further boosting expectations that the European Central Bank (ECB) will have to continue hiking interest rates.
The single currency also enjoyed its negative correlation to a weakening US Dollar (USD) and an upbeat mood in European markets amid Ukrainian victories on the battlefield.
Aside from the Eurozone’s final services PMI this morning, news from Ukraine could prompt most movement in EUR. Will the recent optimism continue, or could Ukraine’s fresh military advances provoke more aggression from Moscow?
US Dollar (USD) Slides amid Risk-Positive Trade
The US Dollar fell through yesterday’s session as a bullish market mood sapped demand for the safe-haven currency.
The optimistic tone came as markets bet on less aggressive action from the Federal Reserve following recent weak US data. In the afternoon, a larger-than-forecast decline in US job openings added to the pressure on USD. With the American labour market beginning to cool, the Fed may not need to raise interest rates as high as anticipated.
Looking ahead, the US ISM services PMI is in focus. Will a strong result bolster the ‘Greenback’, or will another disappointing data release add to USD’s woes?
Canadian Dollar (CAD) Mixed amid Stronger Oil and Weaker US Economy
The Canadian Dollar (CAD) traded without a clear directional bias yesterday. While stronger oil prices underpinned the commodity-linked currency, signs of a slowdown in the US economy weighed on CAD, as the US is the biggest buyer of Canadian exports.
Today, Canada’s latest balance of trade figures could support the ‘Loonie’ if they reveal another strong trade surplus. Otherwise, crude prices and US data could influence CAD exchange rates.
Australian Dollar (AUD) Stabilises following RBA-Inspired Slump
The Australian Dollar (AUD) wavered sideways overnight, stabilising after yesterday’s sell-off following the Reserve Bank of Australia’s (RBA) smaller-than-expected rate rise. The limited movement came amid a mixed market mood.
New Zealand Dollar (NZD) Wavers Higher following RBNZ Rate Rise
The New Zealand Dollar (NZD) saw some volatility in overnight trade, strengthening overall, as the Reserve Bank of New Zealand (RBNZ) raised interest rates by another 50 basis points.