Pound (GBP) supported by UK-EU trade breakthrough
The pound (GBP) advanced against most major peers on Tuesday, buoyed by news of a fresh UK-EU agreement easing checks on food, livestock, and agricultural goods.
The deal was welcomed by GBP investors, amid forecasts that it could add £9bn to the UK economy.
Looking ahead, GBP movement may be influenced by a speech from Bank of England (BoE) Chief Economist Huw Pill. As one of the more hawkish voices on the BoE’s Monetary Policy Committee (MPC), his comments could offer fresh support to the pound.
Euro (EUR) lifted by weaker US dollar
The euro (EUR) found support on Tuesday, as the currency benefited from its negative correlation with the US dollar (USD), which remained under pressure.
However, gains were limited after the European Commission sharply downgraded its 2025 Eurozone growth outlook, citing the impact of global trade fragmentation.
Germany’s latest producer price index may weigh on EUR sentiment today if it confirms another notable drop in input costs.
US dollar (USD) retreats following credit rating downgrade
The US dollar came under renewed selling pressure at the start of this week after Moody’s downgraded its US sovereign credit rating to Aa1, citing long-term fiscal concerns and rising interest costs.
This sparked volatility in financial markets, driving a selloff in US bonds and sending Treasury yields higher, which in turn stoked fears over the sustainability of US debt.
Unless any encouraging news emerges on US trade negotiations, the downgrade fallout may continue to limit USD appeal through today’s session.
Canadian dollar (CAD) weakens as crude prices fall
The Canadian dollar (CAD) softened on Tuesday, with losses driven by declining oil prices and the broader weakness of the US dollar, to which the ‘loonie’ is closely tied.
Attention now turns to Canada’s latest consumer price index release. A marked decline in inflation could add to the pressure on the CAD, particularly if it reinforces expectations of further Bank of Canada (BoC) rate cuts.
Australian dollar (AUD) slides after dovish RBA decision
The Australian dollar (AUD) fell sharply overnight following the Reserve Bank of Australia’s (RBA) decision to cut interest rates by 25 basis points and issue a more cautious outlook, including downgraded growth projections and hints at more easing to come.
New Zealand dollar (NZD) follows AUD lower
The New Zealand dollar (NZD) also weakened overnight, with the ‘kiwi’ dragged lower in tandem with the retreating Australian dollar.
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