Pound (GBP) undermined by budget concerns
The pound (GBP) came under pressure yesterday as a fresh jump in UK bond yields reignited worries over the government’s upcoming autumn budget.
The move in yields was sparked by a minor reshuffle in Downing Street, with the subsequent increase in borrowing costs expected to squeeze Chancellor Rachel Reeves’ fiscal flexibility.
As UK bond yields near a new 27-year high, appetite for the pound is likely to remain subdued today.
Euro (EUR) rangebound despite stronger PMI revision
The euro (EUR) was unable to find direction on Monday even after the Eurozone’s latest manufacturing PMI was revised higher, offering only limited backing for the single currency.
The index was adjusted up from 50.5 to 50.7 in August, signalling the fastest pace of factory growth in the bloc since June 2022.
Looking ahead, attention will turn to the Eurozone’s consumer price index. If August’s inflation release comes in hotter-than-forecast, similarly to Germany’s figures, the euro could push higher.
US dollar (USD) softens amid quiet trade
The US dollar (USD) edged lower during yesterday’s session as muted liquidity from the Labor Day holiday dampened demand for the ‘greenback’.
This saw investors largely overlook a federal appeals court ruling that declared former US President Donald Trump’s tariff actions unlawful.
As US markets return today, the ISM manufacturing PMI will be in focus. With August’s release set to mark a sixth straight contraction in the US factory sector, the dollar may face additional headwinds.
Canadian dollar (CAD) static in holiday trade
The Canadian dollar (CAD) traded in a narrow range on Monday as Canada’s Labour Day celebrations limited market activity and kept CAD volatility in check.
In today’s session, with little domestic data due, the ‘loonie’ is expected to take direction from oil price movements.
Australian dollar (AUD) weakens as risk appetite fades
The Australian dollar (AUD) drifted lower overnight on Monday, as fading risk sentiment and a modest US dollar rebound curbed demand for the high-yielding ‘Aussie’.
New Zealand dollar (NZD) slips on cautious mood
The New Zealand dollar (NZD) also retreated overnight as investors turned more risk-averse, limiting demand for the ‘kiwi’.
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