Pound (GBP) directionless amid mixed borrowing figures
The pound (GBP) traded without a clear trajectory yesterday, climbing against weaker rivals as markets digested mixed UK government borrowing data.
Although public borrowing increased in September, the Office for Budget Responsibility (OBR) noted that stronger-than-expected tax receipts have eased fiscal pressures, with borrowing likely to fall over the second half of the year.
However, Sterling slumped this morning after softer-than-expected UK inflation figures prompted markets to increase Bank of England (BoE) interest rate cut bets. Headline inflation remained at 3.8% in September instead of rising to 4%, while core inflation slipped from 3.6% to 3.5%, confounding forecasts of a rise to 3.7%.
Euro (EUR) pressured by correlation with USD
The euro (EUR) weakened against stronger peers on Tuesday, undermined by its negative correlation with the US dollar (USD).
A quiet Eurozone data calendar left the single currency largely driven by external factors.
Looking ahead, speeches from European Central Bank (ECB) President Christine Lagarde and Vice-President Luis de Guindos could lend EUR some support if policymakers strike a hawkish tone.
US dollar (USD) strengthens as economic jitters fade
The US dollar firmed yesterday as fears over the resilience of the US credit market eased.
Further supporting the ‘greenback’, tensions between the US and China appeared to thaw, with President Donald Trump expressing optimism about a ‘fantastic deal’ between the two nations.
With no major US data releases today, global risk sentiment is likely to guide USD movement. A deterioration in market mood could extend the US dollar’s gains.
Canadian dollar (CAD) advances as inflation exceeds forecasts
The Canadian dollar (CAD) appreciated on Tuesday, initially supported by stronger oil prices before being boosted further by higher-than-expected domestic inflation data.
Looking to today, the commodity-linked ‘loonie’ may continue to take its cue from oil price dynamics. Further gains in crude could help CAD maintain its upward trajectory.
Australian dollar (AUD) lifted by China stimulus optimism
The Australian dollar (AUD) edged higher overnight, finding support from rising commodity prices and renewed hopes of additional stimulus measures from China, despite an overall cautious mood in global markets.
New Zealand dollar (NZD) gains alongside AUD
The New Zealand dollar (NZD) also strengthened overnight, benefitting from robust commodity performance and its close positive correlation with the Australian dollar.
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