Pound (GBP) Buoyed by BoE Intervention
The Pound (GBP) found some support yesterday, wavering higher against its weaker peers, as the Bank of England (BoE) expanded its bond-buying operation.
The bank widened its gilt purchases to include index-linked gilts while also significantly picking up the pace of its market-stabilising intervention. This seemed to support Sterling, although investors were concerned about the threat to the UK’s financial stability.
Last night, however, Sterling slid after BoE Governor Andrew Bailey said the bank will not extend its bond-buying scheme beyond Friday. Rumours that the BoE may extend the scheme anyway could cause some GBP volatility today. Meanwhile, UK GDP unexpectedly contracted in August, putting pressure on the Pound.
Euro (EUR) Mixed amid Lack of Data
The Euro (EUR) traded without a clear directional bias yesterday amid a lack of notable Eurozone data.
A pullback in the US Dollar (USD) lent EUR some support, due to the currencies’ strong negative correlation. However, worries about the Russia-Ukraine war applied counterpressure to the single currency, seeing it waver in a narrow range.
Today’s Eurozone industrial production may provide the Euro with a boost this morning, as economists expect a return to growth. In the afternoon, investors will turn their attention to a speech from European Central Bank (ECB) President Christine Lagarde.
US Dollar (USD) Retreats as Treasury Yields Fall
The US Dollar softened yesterday as the ‘Greenback’ was seemingly overbought, triggering a corrective pullback.
A decline in US Treasury yields added to the downside pressure, as did larger-than-forecast declines in US economic confidence and consumer inflation expectations in the afternoon.
Looking ahead, this evening brings the release of the Federal Open Market Committee (FOMC) meeting minutes. If they reveal that the Fed remains hell-bent on hiking interest rates, despite recession risks, the US Dollar could climb.
Canadian Dollar (CAD) Shored Up by Rising Bond Yields
The Canadian Dollar (CAD) found some success against its weaker rivals yesterday, recouping overnight losses. An uptick in Canadian government bond yields buoyed CAD, although a dip in oil prices capped the crude-linked ‘Loonie’.
With Canadian data still in short supply today, bond yields and oil prices may continue to drive CAD exchange rates.
Australian Dollar (AUD) Wobbles amid Lukewarm Risk Appetite
The risk-sensitive Australian Dollar (AUD) wavered overnight amid a mixed market mood.
New Zealand Dollar (NZD) Ticks Higher despite Lack of Data
The New Zealand Dollar (NZD) managed to edge higher in overnight trade, without a clear catalyst for the movement.