Pound climbs as UK inflation beats forecasts

Pound (GBP) boosted by hotter inflation reading

The pound (GBP) surged to two-month highs yesterday after the UK’s consumer price index for April exceeded expectations, dampening bets on a June interest rate cut from the Bank of England (BoE).

Some profit-taking then saw Sterling waver, but it was able to cling on to most of its gains by the end of the session.

This morning, an expected slowdown in UK service sector activity could dent GBP. A speech from BoE Chief Economist Huw Pill could then help the pound rebound, if he hints that a June rate cut is now less likely.

Euro (EUR) falters in absence of data

The euro (EUR) struggled yesterday, weakening against its stronger rivals amid a lack of Eurozone economic data.

Meanwhile, although a risk-off mood lent the safer euro some support, the currency’s negative correlation with a stronger US dollar (USD) stifled its potential.

Turning to today, the Eurozone PMIs are in the spotlight for EUR investors. Could another acceleration in business activity this month lift the euro?

US dollar (USD) rises on hawkish Fed minutes

The US dollar gained ground yesterday as a risk-off market mood and an initial uptick in US Treasury yields lent the ‘greenback’s support.

In the evening, the Federal Reserve’s latest meeting minutes gave USD a further boost as they revealed that Fed policymakers were open to raising rates again if inflation proves persistent.

Looking forward, the latest US PMIs this afternoon could impact USD. Although not as impactful as the ISM releases, May’s preliminary surveys from S&P Global might dent the ‘greenback’ if they show signs that private sector growth is moderating.

Canadian dollar (CAD) falls amid weaker oil prices

The crude-linked Canadian dollar (CAD) slipped against many of its peers yesterday as declining oil prices dragged the ‘loonie’ lower.

With Canadian data thin on the ground today, crude prices could continue to drive CAD movement. If oil remains subdued, CAD could suffer.

Australian dollar (AUD) tumbles amid Fed rate hike fears

The Australian dollar (AUD) slumped to weekly lows yesterday evening amid market fears of another rate hike from the Fed. The ‘Aussie’ then languished overnight following lacklustre Australian PMI data.

New Zealand dollar (NZD) recovers on upbeat retail sales

The New Zealand dollar (NZD) also fell in the wake of the Fed minutes last night. However, the ‘kiwi’ rebounded after New Zealand retail sales exceeded forecast to show a return to growth in the first quarter of this year.

Samuel Birnie

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