Euro (EUR) Strengthens as Inflation Data Boosts ECB Bets
The Euro (EUR) rallied yesterday as new inflation data boosted expectations that the European Central Bank (ECB) will continue to raise interest rates.
Consumer inflation expectations in the Eurozone rose unexpectedly. Meanwhile, German inflation eased by less than forecast. On a monthly basis, inflation in the Eurozone’s largest economy expanded at a consistent pace.
Turning to today, the Eurozone’s consumer price index for March is due out. An expected uptick in core inflation could boost the Euro by prompting more ECB rate hike bets.
Pound (GBP) Ticks Higher on UK Business Optimism
The Pound (GBP) gained ground yesterday following some upbeat news about the UK’s economic outlook.
A survey from the Confederation of British Industry (CBI) found that UK firms expect activity to return to growth over the next three months – the first time the poll has seen positive expectations since April 2022.
This morning, the UK’s final GDP growth rate for the fourth quarter was revised higher. Rather than stagnating, the British economy expanded 0.1% in the last three months of 2022. This could support Sterling through today’s session.
US Dollar (USD) Weakens in Risk-Positive Trade
The US Dollar (USD) declined yesterday, with traders shunning the safe-haven currency amid the prevailing risk-on mood.
Hopes that central banks will soon stop raising interest rates cheered markets, while signs of ongoing stability in the financial sector added to the upbeat mood.
Looking ahead, the focus for USD investors today is the latest core PCE price index. As the Federal Reserve’s preferred measure of inflation, the index could support or sap Fed rate hike bets. If it shows that inflation is persistently sticky, the ‘Greenback’ may rally.
Canadian Dollar (CAD) Dragged Lower by USD
The Canadian Dollar (CAD) stumbled against many of its peers yesterday as CAD suffered from its positive correlation with the weakening USD. However, an uptick in oil prices helped cushion the downside for the commodity-linked ‘Loonie’.
This afternoon, an expected expansion in Canada’s January GDP rate could lift the ‘Loonie’. USD movement and oil price dynamics may also affect the Canadian Dollar.
Australian Dollar (AUD) Sheds China-Inspired Gains
The Australian Dollar (AUD) initially firmed last night thanks to better-than-expected Chinese data. However, the ‘Aussie’ lost its gains later on.
New Zealand Dollar (NZD) Buoyed by Risk-On Mood
Likewise, the risk-sensitive New Zealand Dollar (NZD) climbed amid an upbeat mood last night but has since stumbled.