Pound (GBP) strengthens as inflation eases
The pound (GBP) gained ground yesterday as markets welcomed a surprise slowdown in UK inflation last month.
The slowdown in inflation gave rise to speculation that the Bank of England (BoE) may cut interest rates next month, which could help ease the burden of government borrowing costs.
However, the pound has begun to slip this morning following the release of GDP data showing the UK’s economic recovery in November was more modest than anticipated.
Euro (EUR) pressured by weak German GDP
The euro (EUR) faced headwinds on Wednesday after Germany’s GDP figures for 2024 revealed the economy contracted for a second consecutive year.
Further losses came as European Central Bank (ECB) policymaker Francois Villeroy de Galhau suggested that interest rates may need to reach 2% by mid-year.
Attention will now turn to the ECB’s December policy meeting minutes. If these hint at further rate cuts, the euro could face additional selling pressure.
US dollar (USD) slips as core inflation cools
The US dollar (USD) softened on Wednesday, following the latest US inflation data. While headline inflation rose as expected, core inflation surprised markets by easing to 3.2%.
This dampened demand for the ‘greenback,’ as investors reassessed their expectations for a Federal Reserve interest rate cut this year.
Later today, the release of December’s US retail sales figures could weigh on the USD if they show a slowdown in consumer spending.
Canadian dollar (CAD) dips despite oil gains
The Canadian dollar (CAD) edged lower on Wednesday, dragged down by its correlation with the weakening US dollar.
With little in the way of domestic data, the ‘loonie’ may still find some support today if oil prices continue to climb.
Australian dollar (AUD) weakens as jobless rate rises
The Australian dollar (AUD) fell overnight after data revealed a rise in unemployment in December, driven by a decline in full-time employment.
New Zealand dollar (NZD) muted amid cautious trade
The New Zealand dollar (NZD) also struggled in overnight trade, as a risk-averse market mood sapped demand for the ‘kiwi.’
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