Pound (GBP) muted by bond market moves
The pound (GBP) was subdued yesterday as stronger bond prices reignited concerns over the UK’s fiscal outlook.
Speculation continues to build over which tax measures Chancellor Rachel Reeves might introduce to plug a widening hole in public finances, and what effect these could have on growth.
Today, GBP investors will be focused on the UK’s consumer price index. Inflation accelerated again in July, reinforcing recent hawkish Bank of England (BoE) interest rate expectations and potentially lending support to the pound.
Euro (EUR) supported by Ukraine peace deal hopes
The euro (EUR) edged higher on Tuesday amid tentative hopes that a Ukraine-Russia peace agreement may be closer than previously anticipated.
EUR sentiment was also buoyed by a surprising rise in the Eurozone’s current account surplus.
Looking ahead, investors will be awaiting a speech from European Central Bank (ECB) President Christine Lagarde. A broadly hawkish tone could help lift the euro further.
US dollar (USD) flat as risk appetite improves
The safe-haven US dollar (USD) shed its initial gains yesterday as progress in Ukraine peace talks underpinned a modest improvement in market risk appetite.
Meanwhile, comments from Treasury Secretary Scott Bessent suggesting that Federal Reserve rate cuts could benefit the US housing market also weighed on USD demand.
Looking forward, the minutes from the Fed’s July policy meeting will be published today. If they reveal policymakers are warming to rate cuts, the US dollar could weaken ahead of the annual Jackson Hole Symposium later this week.
Canadian dollar (CAD) slides on weak inflation figures
The Canadian dollar (CAD) fell on Tuesday after softer-than-expected inflation data boosted expectations for Bank of Canada (BoC) rate cuts.
With domestic data thin on the ground today, CAD could extend its losses if oil prices continue to trend lower.
Australian dollar (AUD) pressured by USD strength
The Australian dollar (AUD) weakened overnight as a resurgent US dollar reduced demand for the risk-sensitive ‘Aussie’.
New Zealand dollar (NZD) plunges on RBNZ rate cut
The New Zealand dollar (NZD) tumbled overnight after the Reserve Bank of New Zealand (RBNZ) cut interest rates by 25bps and signalled the possibility of further easing ahead.
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