Pound (GBP) Jumps as Optimism Prevails
After initially softening, the Pound (GBP) surged higher on Friday, without a clear catalyst for the movement.
Ongoing optimism in the UK’s outlook seemingly boosted the Pound, with Rishi Sunak surviving his first week in Number 10 relatively unscathed. Government bond yields eased from recent worrying highs, and fiscal and monetary policy were seemingly aligned.
New lending data from the Bank of England (BoE) today could impact GBP exchange rates. Otherwise, domestic UK political news could continue to drive Sterling movement.
Euro (EUR) Struggles despite Strong German Data
The Euro (EUR) failed to make notable gains on Friday, despite strong German data. Germany’s GDP growth and inflation reports printed higher than forecast.
However, dovish comments from European Central Bank (ECB) officials weighed on EUR. Some policymakers pushed back on expectations of another 75bps hike in December, while there were rumours that some members of the bank’s Governing Council opted for a smaller hike at the recent meeting.
Looking ahead, Eurozone GDP and inflation this morning could have a huge impact on EUR exchange rates. Another rise in inflation could prompt renewed ECB rate rise bets.
US Dollar (USD) Undermined by Inflation Miss
As risk aversion returned to markets on Friday, the safe-haven US Dollar (USD) initially enjoyed renewed strength.
However, mixed US inflation data later in the session saw USD trim its gains. Core inflation missed forecasts, as did wage inflation, taking pressure off the Federal Reserve to continue aggressively raising interest rates.
American economic data is thin on the ground today. As a result, risk appetite could drive USD exchange rates.
Canadian Dollar (CAD) Slips amid Weak Trading Signals
The Canadian Dollar (CAD) fell against many of its peers on Friday. Subdued oil prices, muted Canadian government bonds and lacklustre GDP data all left CAD with little support.
With Canadian data thin on the ground today, crude prices could drive the commodity-linked ‘Loonie’.
Australian Dollar (AUD) Trims Gains on Poor Chinese PMI
The Australian Dollar (AUD) initially edged higher overnight as Australian retail sales grew by a steady 0.6% in September. However, an unexpected contraction in China’s latest manufacturing PMI later dented the China-proxy currency.
New Zealand Dollar (NZD) Upside Limited as Market Mood Shifts
The New Zealand Dollar (NZD) also rose early in the overnight session as an upbeat mood supported the risk-sensitive currency. However, the poor Chinese PMI data soured market sentiment, thereby denting the ‘Kiwi’.