Pound (GBP) Firms as UK CPI Boosts BoE Rate Hike Bets
The Pound (GBP) strengthened across the board yesterday as the UK’s consumer price index increased the likelihood of further interest rate rises from the Bank of England (BoE).
Although headline inflation eased, it remained in double digits. Meanwhile, core inflation unexpectedly held steady rather than cooling. With UK inflation looking persistently high, the BoE could opt for another 50bps hike at its February meeting.
There’s a lull in market-moving UK data today. As a result, Sterling may see limited movement.
Euro (EUR) Volatile amid ECB Mixed Messaging
The Euro (EUR) experienced some volatility yesterday as EUR investors speculated about the size of future European Central Bank (ECB) rate rises.
The final Eurozone CPI slowed sharply, as forecast, but ECB policymaker Francois Villeroy de Galhau signalled that multiple 50bps rate hikes were still likely. The Euro traded in a wide range against its peers.
Interest rate expectations will likely continue to drive EUR movement today. ECB President Christine Lagarde is due to speak, and the December meeting minutes are due out. Could further hawkish hints help the common currency rise?
US Dollar (USD) Rallies as Market Mood Sours
The US Dollar (USD) initially dipped yesterday as an upbeat mood dampened the appeal of the safe-haven ‘Greenback’.
However, sentiment soured in the afternoon following worrying US economic data. American retail sales slumped by 1.1% in December, much worse than forecast, indicating trouble in the world’s largest economy. The subsequent downbeat mood boosted USD.
Some Federal Reserve policymaker speeches could impact the US Dollar today. If officials hint at a slower pace of rate rises moving forward, the ‘Greenback’ may turn south again.
Canadian Dollar (CAD) Slumps as PPI and Oil Prices Decline
The Canadian Dollar (CAD) tumbled yesterday as a sharp drop in oil prices dragged the crude-linked currency lower. In addition, a larger-than-forecast fall in the monthly PPI rate dented Bank of Canada (BoC) rate hike bets, adding to CAD’s woes.
With notable Canadian data thin on the ground today, the ‘Loonie’ may trade on oil price dynamics.
Australian Dollar (AUD) Drops on Downbeat Jobs Report
The Australian Dollar (AUD) fell overnight after a disappointing Australian employment report. The jobless rate came in higher than forecast, even though the participation rate dropped, suggesting a weakening labour market.
New Zealand Dollar (NZD) Slips amid Risk-Off Trade
The New Zealand Dollar (NZD) also fell during last night’s trade, with the risk-sensitive ‘Kiwi’ impacted by a gloomy market mood and its positive correlation with the weakening ‘Aussie’.