US Dollar (USD) Stumbles following Fed Decision
The US Dollar (USD) was fairly subdued yesterday as investors were reluctant to place aggressive bets ahead of the Federal Reserve policy decision.
The Fed raised rates by 25bps, as expected, but highlighted how the recent turmoil in the banking sector may result in tighter credit conditions. This led markets to lower their expectations for further hikes, causing USD to slide.
Later today, last week’s initial jobless claims figures are out. Signs that the US labour market remains tight may provide USD with some support.
Pound (GBP) Erases Post-Inflation Gains
The Pound (GBP) initially leapt higher yesterday after a surprise rise in UK inflation raised the likelihood of another interest rate rise from the Bank of England (BoE) today.
However, Sterling relinquished these gains as the session went on, seemingly due to a market correction.
Today, the BoE decision is in the spotlight. A 25bps hike could support the Pound, although any indication that this is the last rate rise could see Sterling slip. If the bank leaves rates unchanged, GBP would likely plunge.
Euro (EUR) Firms following Hawkish ECB Comments
Hawkish rhetoric from European Central Bank (ECB) policymakers boosted the Euro (EUR) yesterday.
ECB President Christine Lagarde said that inflation remains too high and hinted that more rate hikes may come. Her colleague Joachim Nagel was even more hawkish, saying ‘Our fight against inflation is not over’.
Looking ahead, the newest consumer confidence release from the Eurozone may give the single currency a lift later this afternoon. Economists expect morale to have risen to a 13-month high. However, recent banking sector turmoil may derail the forecasts.
Canadian Dollar (CAD) Slips despite Oil Price Rise
The commodity-linked Canadian Dollar (CAD) softened yesterday, despite an uptick in oil prices. CAD suffered from its positive correlation with USD.
Movements in crude oil could drive the ‘Loonie’ today amid a lack of Canadian data.
Australian Dollar (AUD) Rises amid Risk-On Mood
The Australian Dollar (AUD) strengthened overnight amid an upbeat mood following the Fed’s interest rate decision.
New Zealand Dollar (NZD) Climbs as Sentiment Improves
Likewise, the risk-sensitive New Zealand Dollar (NZD) gained ground amid the positive trading sentiment.