Pound (GBP) supported by optimistic market mood
The pound (GBP) traded with modest gains on Monday, as a broadly upbeat market mood helped to underpin the currency.
Sterling also strengthened as the UK’s latest manufacturing PMI confirmed factory sector growth hit a two-year high in August.
In the absence of any UK data of note, movement in the pound may continue to be driven by market sentiment. Will a cautious mood potentially sap Sterling?
Euro (EUR) underpinned by stronger-than-expected manufacturing PMI
The euro (EUR) was supported at the start of this week by the Eurozone’s latest manufacturing PMI as August’s finalised index was revised slightly higher.
However, while the index beat expectations, it still showed the bloc’s factory sector contracted last month, limiting the single currency’s upside potential.
With Eurozone economic data in short supply today, movement in EUR may be linked to the currency’s negative correlation with the US dollar (USD). If the ‘greenback’ strengthens, the euro may slip.
US dollar (USD) side-lined by US federal holiday
The US dollar (USD) was left directionless at the start of this week, as US markets were closed for an extended Labor Day weekend.
However, an uptick in US Treasury yields helped the ‘greenback’ to firm in overnight trade.
Looking ahead, the publication of the latest ISM manufacturing PMI will be in the spotlight today. August’s index could apply pressure to the US dollar this afternoon if it reports another contraction in US factory sector growth.
Canadian dollar (CAD) slips ahead of BoC rate decision
Canadian markets were also closed on Monday, leaving the Canadian dollar (CAD) vulnerable to selling pressure ahead of an expected interest rate cut from the Bank of Canada (BoC) later in the week.
Expect investors to remain wary of the ‘loonie’ today as they brace for the BoC’s rate decision on Wednesday.
Australian dollar (AUD) slips as USD rebounds
The Australian dollar (AUD) trended lower overnight on Monday, as an uptick in US Treasury yields lifted the US dollar and limited demand for risk-sensitive currencies.
New Zealand dollar (NZD) amid waning risk appetite
The New Zealand dollar (NZD) also slumped in overnight trade as market risk appetite deteriorated in response to renewed USD demand.