Pound (GBP) pressured by budget concerns
The pound (GBP) ended last week on the defensive as speculation mounted over the tax measures Chancellor Rachel Reeves may introduce in her upcoming autumn budget.
Investor sentiment has been unsettled by talk of potential tax rises, with fears these could stall the UK’s already fragile growth outlook as the government seeks to close a major funding shortfall.
With no key UK data scheduled for release today, Sterling may struggle to find direction.
Euro (EUR) muted despite stronger German CPI
The euro (EUR) remained largely rangebound on Friday even as Germany’s latest inflation figures surprised to the upside.
Preliminary data revealed consumer prices rose from 2% to 2.2% in August, outpacing the forecast 2.1% rise.
Attention at the start of this week will fall on the Eurozone’s unemployment report. Should the jobless rate hold at a historic low of 6.2%, it may provide the euro with some modest support.
US dollar (USD) lifted by firmer inflation data
The US dollar (USD) strengthened into the weekend after the Federal Reserve’s preferred gauge of inflation – the core PCE price index – rose to 2.9%, its highest level in five years.
Although the release did not alter expectations for a September rate cut, the figures prompted some investors to scale back bets on an additional 50bps worth of easing later in 2025.
With US markets shut for Labor Day, thin liquidity may curb USD volatility today.
Canadian dollar (CAD) dragged lower by weak GDP
The Canadian dollar (CAD) stumbled on Friday following the release of Canada’s second quarter GDP report, which showed a sharper-than-expected contraction.
At the beginning of this week, CAD investors are likely to shift their focus back to oil markets, with continued weakness in crude prices threatening to add further pressure to the ‘loonie’.
Australian dollar (AUD) soft as China’s industry struggles
The Australian dollar (AUD) slipped at the start of the week after Chinese data over the weekend revealed the manufacturing sector shrank for a fifth straight month.
New Zealand dollar (NZD) steady amid cautious sentiment
The New Zealand dollar (NZD) was little moved in overnight trade, as geopolitical tensions kept risk appetite subdued at the start of the week.
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