Pound (GBP) Soars as Markets Rally on U-Turn Rumours
The Pound (GBP) surged higher yesterday, climbing over 2% against some of its peers, amid reports that Liz Truss was considering a huge climbdown from the calamitous mini-budget.
Speculation abounded, with many news outlets reporting that a rise in corporation tax was on the cards, despite Truss vowing to scrap the planned hike from 19% to 25%. The prospect that more elements of the government’s unfunded fiscal plans – which have caused mayhem in UK financial markets – could be scrapped cheered GBP investors.
Today, all eyes are on Number 10 after Chancellor Kwasi Kwarteng flew home from Washington early last night. If the government announces a U-turn, Sterling could rise further. But if there is no climbdown, or if the change in position is too small for markets, then GBP may falter.
Euro (EUR) Rises amid Buoyant Mood
The Euro (EUR) strengthened yesterday as an upbeat mood in European markets lent the single currency some support.
Hopefulness around the Russia-Ukraine crisis may have buoyed EUR. The UN general assembly overwhelming voted to condemn Russia’s annexation of Ukrainian territories, further isolating Russia internationally. Meanwhile, Kyiv’s allies pledged more air defence weaponry.
Later this morning, the Eurozone’s latest balance of trade data could impact EUR. Otherwise, news from Ukraine could be the main impetus for movement in the Euro.
US Dollar (USD) Down despite Hot Inflation Reading
The US Dollar (USD) was highly volatile yesterday, declining overall as a risk-on mood weighed on the safe-haven ‘Greenback’.
The volatility came as US core inflation rose more than forecast, causing USD to spike. However, the upbeat market mood erased these gains and dragged the currency lower.
Risk sentiment will likely continue to influence the ‘Greenback’ through today’s session. In the afternoon, economists expect positive retail sales and consumer sentiment data. Will the latest economic reports bolster Federal Reserve rate rise bets, thereby boosting USD?
Canadian Dollar (CAD) Mixed amid US Market Volatility
The Canadian Dollar (CAD) also fluctuated yesterday, as the volatility in the US Dollar reverberated though North American markets. Overall, the crude-linked ‘Loonie’ weakened against its stronger peers, despite an uptick in oil prices.
With no market-moving Canadian data due out today, CAD may remain vulnerable to external factors, such as US market movements and oil prices.
Australian Dollar (AUD) Firms amid Upbeat Sentiment
The Australian Dollar (AUD) gained ground in overnight trade as a bullish market mood boosted the risk-sensitive ‘Aussie’.
New Zealand Dollar (NZD) Enjoys Risk-Positive Trade
Likewise, the risk-tied New Zealand Dollar (NZD) firmed last night thanks to the upbeat mood among investors.