Pound (GBP) Slips amid Political Turmoil
The Pound (GBP) pared its gains at the end of the week after Prime Minister Liz Truss sacked Chancellor Kwasi Kwarteng. Commentators speculated that the Conservative Party may oust Truss within days, raising fears of further political instability in the UK.
Limiting losses, Truss also backpedalled on her pledge to freeze corporation tax at 19%. Instead, the tax will rise to 25% in April, putting an estimated £18bn into the government coffers each year.
Today the new Chancellor Jeremy Hunt will make a statement, bringing forward elements of the medium-term fiscal plan. This could help to stabilise Sterling. However, huge uncertainty remains and there is the threat of continued volatility.
Euro (EUR) Firms amid Hawkish ECB Rhetoric
The Euro (EUR) managed to rise against many of its rivals on Friday, despite increasing concerns about the escalating Russia-Ukraine conflict.
Supporting the Euro were hawkish comments from European Central Bank (ECB) policymakers. The ECB’s Peter Kazimir said another 75-bp rate rise is appropriate this month, while his colleague Bostjan Vasle expressed support for 75-bp hikes in both October and December.
Amid an absence of Eurozone data today, EUR could continue to trade on Russia-Ukraine news. With the Kremlin launching further attacks on civilian infrastructure, the single currency could face some pressure.
US Dollar (USD) Rises amid Risk-Negative Trade
The US Dollar (USD) strengthened through Friday’s session as risk aversion swept markets, thereby boosting the safe-haven currency.
An unexpected stall in US retail sales briefly dented USD. However, a souring market sentiment and stronger-than-forecast rise in consumer sentiment helped the ‘Greenback’ maintain the upside.
With US data thin on the ground today, market sentiment could remain the key driver of USD movement.
Canadian Dollar (CAD) Subdued as Oil Drops
The crude-linked Canadian Dollar (CAD) was mixed on Friday, slipping against its stronger peers amid a dip in oil prices.
Amid a lack of Canadian economic data today, oil market movement could continue to influence CAD.
Australian Dollar (AUD) Gains Ground amid Risk-On Mood
The risk-sensitive Australian Dollar (AUD) strengthened overnight amid a bullish mood in markets.
New Zealand Dollar (NZD) Ticks Higher despite Poor Data
Likewise, the New Zealand Dollar (NZD) firmed amid the upbeat mood, despite a weaker-than-expected services PMI.