Pound (GBP) sidelined by potential infrastructure cuts
The pound (GBP) traded in a narrow range yesterday amid fresh concern over the UK’s upcoming Autumn Budget.
This followed reports that Chancellor Rachel Reeves could introduce billions of pounds worth of infrastructure cuts, despite Labour’s pledge to invest more in order to boost economic growth.
Turning to today’s session the pound is off to a poor start after Bank of England (BoE) Governor Andrew Bailey suggested the bank could become ‘a bit more activist’ in cutting interest rates if inflation continues to fall.
Euro (EUR) muted on growth warning
The euro (EUR) was subdued on Wednesday in the wake of comments by European Central Bank (ECB) Vice-President Luis de Guindos.
Guindos warned that ‘risks to growth are still tilted to the downside’, stoking concerns of potential headwinds facing the Eurozone economy.
The Eurozone will publish its latest producer price index later this morning. If August’s data reports producer price pressures continue to cool, it’s likely to further weaken inflation expectations and drag on the euro.
US dollar (USD) firms on upbeat US jobs data
The US dollar (USD) was initially muted yesterday, despite uncertainty over how events are unfolding in the Middle East.
USD exchange rates then began to firm later in the afternoon after a stronger-than-expected ADP employment report helped further temper Federal Reserve interest rate cut expectations.
The release of the latest ISM services PMI will be in focus this afternoon. September’s index is expected to report a modest uptick in service sector activity, which may reflect positively on the US dollar.
Canadian dollar (CAD) underpinned by oil price surge
The Canadian dollar (CAD) trended broadly higher on Wednesday with the commodity-linked currency drawing support from a sharp uptick in oil prices.
Looking ahead, if oil prices continue to appreciate, the ‘loonie’ may extend its gains through today’s session.
Australian dollar (AUD) softens as export growth slumps
The Australian dollar (AUD) retreated overnight on Wednesday after Australia’s latest trade figures reported a surprise contraction in export growth in August.
New Zealand dollar (NZD) slips in risk-averse trade
The New Zealand dollar (NZD) also retreated in overnight trade as a cautious market mood saw investors shy away from the risk-sensitive ‘kiwi’.