Euro (EUR) Firms as Hawkish ECB Comments Continue
The Euro (EUR) gained ground through yesterday’s session thanks to hawkish comments from two European Central Bank (ECB) policymakers.
François Villeroy de Galhau said that interest rate rises must continue at a ‘pragmatic pace’ over the coming months. Meanwhile, Olli Rehn said ‘[p]olicy rates will still have to rise significantly’. A growing chorus of hawkish voices at the ECB this week has kept investors betting on the Euro.
Looking ahead, a lack of data may leave EUR exchange rates vulnerable today. Could an increase in risk appetite following the US inflation figures see the safer Euro struggle against its riskier peers?
Pound (GBP) Slips as Strike Action Intensifies
The Pound (GBP) declined against the majority of its peers on Wednesday as strike action continued to intensify across the UK.
Health unions further escalated their dispute with the government by refusing to submit evidence to the NHS pay review body. Meanwhile, physiotherapists became the latest group of NHS workers to take industrial action. As the government-union pay disputes get worse, it spells more pain for the British economy.
This week’s quiet data calendar remains sparse today. Therefore domestic news may continue to weigh on the Pound.
US Dollar (USD) Subdued ahead of US Inflation
The US Dollar (USD) struggled for direction yesterday as a mixed market mood kept the safe-haven ‘Greenback’ stuck in a narrow range.
USD investors also seemed hesitant to place any aggressive bets ahead of this afternoon’s CPI reading, which could cause significant movement.
If US inflation cools again, as forecast, the likely pullback in Federal Reserve rate hike bets could see the US Dollar slump.
Canadian Dollar (CAD) Mixed as Oil Rises and Bonds Fall
The Canadian Dollar (CAD) traded without a clear directional bias yesterday. An uptick in oil prices supported the crude-linked currency, but a decline in Canadian government bond yields offset the upside.
CAD’s increasingly positive correlation with the US Dollar could drive movement in the ‘Loonie’ today. If US inflation cools as much as markets expect, the Canadian Dollar may drop.
Australian Dollar (AUD) Flat following Trade Data
The Australian Dollar (AUD) traded mostly sideways overnight following mixed trade data and a lukewarm market mood.
New Zealand Dollar (NZD) Rangebound alongside AUD
Likewise, the New Zealand Dollar (NZD) moved in a tight range last night, trading true to its positive correlation with AUD.