Pound (GBP) sinks as UK bond yields soar
The pound (GBP) stumbled on Wednesday, pressured by growing unease surrounding the UK’s debt markets.
Yields on 30-year gilts surged to levels not seen since 1998, surpassing those reached during January’s bond market turmoil and raising fresh doubts about the government’s ability to balance growth ambitions with strict fiscal discipline.
With no major UK data releases scheduled today, the pound could remain on the back foot if gilt yields continue to climb.
Euro (EUR) climbs as German coalition deal lifts sentiment
The euro (EUR) pushed higher yesterday, supported both by reduced demand for the US dollar (USD) and improving sentiment in German politics.
Markets welcomed news that Germany’s CDU and SPD reached a deal to form a coalition, offering hope for greater political stability and progress on economic reforms in Europe’s largest economy.
As long as risk-off sentiment lingers and the US dollar stays under pressure, the euro is likely to retain its upward momentum.
US dollar (USD) swings on tariff reprieve and inflation risks
The US dollar fell in early trade on Wednesday amid renewed US-China trade tensions, as tit-for-tat tariffs unsettled markets.
However, the ‘greenback’ bounced back later in the session after US President Donald Trump revealed a 90-day suspension on most new tariffs, excluding those targeting China.
Looking ahead, today’s US inflation report could spark fresh volatility. Softer CPI figures may increase expectations of a Fed rate cut, which could pressure USD, although looser policy might also boost economic sentiment and limit losses.
Canadian dollar (CAD) resilient despite oil market woes
The Canadian dollar (CAD) strengthened on Wednesday, even as oil prices slumped to fresh multi-year lows, breaking their usual correlation.
Traders will be watching to see if this divergence continues today, or whether a modest oil price rebound in response to Trump’s tariff pause helps to reinforce the ‘loonie’.
Australian dollar (AUD) gains capped by China deflation concerns
The Australian dollar (AUD) gained ground overnight as global markets responded positively to the temporary suspension of US tariffs. These gains were partially offset by data showing continued deflation in China last month, fuelling concerns over Australia’s key trade partner.
New Zealand dollar (NZD) climbs on global risk rebound
The New Zealand dollar (NZD) was also buoyed in overnight trade, rising alongside the broader market rally driven by easing trade tensions and improved risk appetite.
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