Pound (GBP) Climbs amid BoE Bets
The Pound (GBP) strengthened yesterday as markets bet on more Bank of England (BoE) interest rate rises.
After last week’s shock spike in core inflation, multiple former BoE policymakers have said that the Bank Rate will need to rise as high as 6% to tame stubborn inflationary pressures. With markets pricing in more policy tightening, Sterling rallied.
British economic data remains thin on the ground today. As a result, Sterling could see limited movement, with BoE rate hike bets perhaps keeping the currency afloat.
Euro (EUR) Recovers following Hawkish ECB Remarks
The Euro (EUR) initially stumbled yesterday as Eurozone economic sentiment weakened more than forecast in May.
However, EUR was able to make a strong recovery as markets bet on more rate increases from the European Central Bank (ECB). Recently, policymakers have indicated that the bank will hike rates at least twice more, and these comments lifted EUR.
Looking ahead, ECB rate rise bets could continue to impact EUR today. A drop in German inflation may dent expectations, before attention turns to a speech from ECB President Christine Lagarde.
US Dollar (USD) Stumbles as Market Mood Improves
A recovering appetite for risk dented the safe-haven US Dollar (USD) yesterday, with markets cautiously optimistic about a deal to raise the US debt ceiling and avert another global economic shock.
In the afternoon, stronger-than-expected US consumer confidence data put a floor underneath USD, preventing it from falling further.
The latest data on US job vacancies is due out this afternoon. The ‘Greenback’ could drop if there are any signs that the labour market is cooling.
Canadian Dollar (CAD) Subdued as Oil Prices Fall
The Canadian Dollar (CAD) softened against its stronger peers yesterday as weakening oil prices weighed on the commodity-linked ‘Loonie’.
Turning to today, Canada’s GDP growth rate for the first quarter of this year is in the spotlight for CAD investors. An expected return to growth could boost the ‘Loonie’.
Australian Dollar (AUD) Stumbles Despite Uptick in Inflation
The Australian Dollar (AUD) retreated overnight on Tuesday. The drop coming as a souring market mood offset Australia’s latest consumer price index, despite domestic inflation accelerating more than expected last month.
New Zealand Dollar (NZD) Slips on Weak Chinese Manufacturing Data
The New Zealand Dollar (NZD) also weakened in overnight trade, with a weaker-than-expected Chinese manufacturing PMI spooking markets and undermining the appeal of the risk-sensitive ‘Kiwi’.