Pound (GBP) climbs on BoE policy divergence
The pound (GBP) advanced against most major rivals on Monday, underpinned by expectations of policy divergence between the Bank of England (BoE) and the other major central bank.
Markets increasingly anticipate the BoE will maintain its current stance through the rest of the year, leaving Sterling with comparatively higher rate returns than other currencies.
This morning, GBP continues to find support as signs of a cooling labour market have done little to dampen expectations of a hawkish BoE.
Euro (EUR) weakens after French downgrade
The euro (EUR) edged lower at the start of the week after investors reacted to ratings agency Fitch’s downgrade of France’s credit outlook late Friday.
Losses for the single currency were limited, however, as its inverse correlation with the US dollar (USD) cushioned the downside.
For today, attention will centre on Germany’s ZEW sentiment survey. A further dip in confidence could add fresh pressure to the euro.
US dollar (USD) dips on Fed cut speculation
The US dollar struggled to find demand on Monday as investors looked ahead to Wednesday’s Federal Reserve rate decision.
A quarter-point cut is broadly priced in, though speculation that policymakers could entertain a larger 50bps move has unsettled some traders.
Later today, the latest US retail sales release could guide USD movement. Another slowdown in consumer spending may fuel bets on aggressive Fed easing and keep the dollar on the back foot.
Canadian dollar (CAD) subdued despite oil gains
The Canadian dollar (CAD) was broadly flat at the start of the week, with its link to a softer US dollar overshadowing further gains in crude prices.
Focus now turns to Canada’s CPI print. Another downside surprise in August’s inflation report could reinforce expectations of a Bank of Canada (BoC) rate cut this week and weigh on the loonie.
Australian dollar (AUD) steady after RBA remarks
The Australian dollar (AUD) held in a narrow range overnight, following comments from Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter, who indicated inflation is close to returning to target.
New Zealand dollar (NZD) lifted by positive sentiment
The New Zealand dollar (NZD) appreciated in overnight trade, supported by strengthening risk appetite.
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