Pound (GBP) supported by BoE Bailey’s ‘gradual’ rate cut comments
The pound (GBP) was underpinned during yesterday’s session by comments from Bank of England (BoE) Governor Andrew Bailey.
Speaking in an interview with KentOnline, Bailey suggested that UK interest rates will fall ‘gradually’ reinforcing expectations the BoE will be less aggressive than its peers in unwinding its monetary policy.
With UK economic data thin on the ground today, the pound may struggle to find direction.
Euro (EUR) buoyed by USD weakness
The euro (EUR) trended broadly higher on Tuesday, with the single currency drawing support from its negative correlation with the US dollar (USD).
However, these gains remained fairly modest in scope, as the upside in the euro was tempered by data showing that German business sentiment deteriorated to an eight-month low in September.
In the absence of any notable EUR data, the single currency may struggle to attract support today as the focus may shift back to the Eurozone’s increasingly gloomy economic outlook.
US dollar (USD) pressured by risk-on flows
The US dollar stumbled yesterday as the launch of new stimulus measures by China stoked market risk appetite and limited demand for safe-haven assets.
This downturn in USD was then reinforced as the latest US consumer confidence index reported its largest decline in over three years.
US data is in short supply today, potentially leaving the US dollar vulnerable to further losses if market sentiment remains positive.
Canadian dollar (CAD) underpinned by rising oil prices
Despite being pressured by its positive correlation with the US dollar, the Canadian dollar (CAD) was able to hold its ground on Tuesday as the commodity-linked currency was underpinned by rising oil prices.
Looking ahead, movement in CAD is likely to remain tied to oil price dynamics today. If crude prices continue to rally, it may extend additional support to the ‘loonie’.
Australian dollar (AUD) slips on softer-than-expected inflation print
The Australian dollar (AUD) ticked lower overnight on Tuesday as Australia’s latest monthly CPI indicator reported domestic inflation cooled at a faster-than-expected pace in August, further weakening bets for another interest rate hike from the Reserve Bank of Australia (RBA).
New Zealand dollar (NZD) weakens as risk appetite wanes
The New Zealand dollar (NZD) initially rallied in overnight trade, before starting to give ground as a souring market mood began to drag on the risk-sensitive currency.