Pound (GBP) Drops as BoE Sets the Stage for Smaller Hikes
The Pound (GBP) slid yesterday after the Bank of England (BoE) delivered a dovish interest rate rise.
The BoE increased rates by 50bps, as expected. However, in its accompanying statement the bank implied that in future it could hike rates in smaller increments, if at all.
Turning to today, the UK’s final services PMI may influence Sterling if it deviates from preliminary estimates. Otherwise, movement in the Pound may be muted.
Euro (EUR) Fails to Strengthen following ECB Decision
The Euro (EUR) stumbled yesterday, suffering some profit-taking after hitting multi-month highs ahead of the European Central Bank (ECB) decision.
EUR also struggled as markets digested the ECB’s forward guidance. The bank implied that, following a 50bps rate hike in March, it could decide to slow its pace of policy tightening.
If the Eurozone’s finalised PMI confirms a return to growth last month, the common currency could climb higher.
US Dollar (USD) Recovers Post-Fed Losses
The US Dollar (USD) strengthened yesterday, recouping overnight losses following the Federal Reserve’s dovish tilt at its rate decision on Wednesday evening.
An unexpected drop in jobless claims may have aided the US Dollar’s recovery, along with a strong recovery in US factory orders.
Attention now turns to the US non-farm payrolls and ISM services PMI this afternoon. Could strong data boost the US Dollar? Or could it spark a risk-on mood, thereby denting the safer ‘Greenback’?
Canadian Dollar (CAD) Enjoys USD Correlation
The Canadian Dollar (CAD) also recovered yesterday, after sliding earlier in the week. CAD enjoyed some dip-buying along with its positive correlation with the US Dollar.
Looking ahead, a lack of notable Canadian economic data could leave crude-linked CAD to trade in relation to USD and oil price dynamics.
Australian Dollar (AUD) Softens amid Risk-Off Mood
The Australian Dollar (AUD) wavered lower last night, despite better-than-expected PMI results from Australia and China, as an anxious market mood weighed on the risk-sensitive ‘Aussie’.
New Zealand Dollar (NZD) Buoyed by Consumer Confidence Recovery
The risky New Zealand Dollar (NZD) also came under pressure during last night’s downbeat trade. However, a strong recovery in New Zealand consumer confidence gave the ‘Kiwi’ a lift.