Pound Slides after Cooling Inflation Dents BoE Expectations

Pound (GBP) Drops as Markets Revise Rate Hike Bets

The Pound (GBP) took a tumble yesterday after cooler-than-forecast UK inflation saw markets drastically scale back Bank of England (BoE) interest rate expectations.

Headline inflation unexpectedly cooled, while the core rate dropped far more than anticipated. With investors now unsure whether the BoE will raise rates or not, Sterling slumped.

The BoE will announce its decision at noon today. A quarter-point rise could help GBP regain ground. However, if the bank indicates that its tightening cycle may be over, the Pound could plunge.

Euro (EUR) Buoyed by Negative USD Correlation

The Euro (EUR) managed to rise against its weaker peers on Wednesday, as the currency’s negative correlation with a weakening US Dollar (USD) kept it afloat.

However, a cheery tone in markets capped gains for the safer single currency.

Looking ahead, European Central Bank (ECB) President Christine Lagarde is due to speak this afternoon. Any dovish comments could put pressure on EUR exchange rates.

US Dollar (USD) Rallies as Fed Hints at One More Hike

An upbeat market mood saw the US Dollar stumble yesterday, as investors shunned the safe-haven currency in favour of riskier assets.

In the evening, the Federal Reserve’s interest rate decision saw USD rally. The US central bank left rates unchanged but indicated that it may hike again before the end of the year.

This afternoon, the latest initial jobless claims figure is due out. Could signs of a still-tight labour market see the ‘Greenback’ climb higher?

Canadian Dollar (CAD) Mixed amid Weak USD and Strong Oil

The Canadian Dollar (CAD) faced mixed trade on Wednesday, as CAD’s correlations with USD and rising oil prices pulled the currency in different directions.

Notable Canadian data remains in short supply today. As a result, crude prices could continue to drive CAD movement.

Australian Dollar (AUD) Slides as Market Mood Sours

The risk-sensitive Australian Dollar (AUD) slumped last night, shedding the gains it made during yesterday’s European session, as the prospect of higher global borrowing costs following the Fed decision sparked widespread risk aversion.

New Zealand Dollar (NZD) Stumbles despite Strong GDP

The New Zealand Dollar (NZD) also weakened during overnight trade amid the gloomy market mood. Even a larger-than-forecast recovery in New Zealand GDP failed to boost the ‘Kiwi’.

Samuel Birnie

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