Pound (GBP) slides following pre-budget comments
The pound (GBP) weakened against its major peers yesterday after Chancellor Rachel Reeves used a pre-budget address to prepare markets for potential tax increases.
Expectations of tighter fiscal policy fuelled concerns over slower UK growth, while also raising the prospect of the Bank of England (BoE) adopting a looser monetary stance – both factors that dragged on Sterling.
Today’s final UK services PMI may do little to move the pound unless it diverges notably from the flash estimate, leaving speculation over the budget and BoE outlook likely to dictate GBP direction.
Euro (EUR) firms amid cautious sentiment
The euro (EUR) advanced on Tuesday, with the safe-haven single currency supported by a risk-off tone across markets.
However, the euro’s gains were capped by its lack of fresh data catalysts and its inverse relationship with the strengthening US dollar (USD).
This morning’s release showed a 1.1% rebound in German factory orders for September, which may lend further support to the euro through the day.
US dollar (USD) extends rally to multi-month peaks
The US dollar rose yesterday, touching multi-month highs against a range of peers as risk aversion swept through global markets.
Elevated US Treasury yields – which have remained buoyant since last week’s Federal Reserve decision – also reinforced the American dollar’s appeal.
Looking ahead, today’s ADP employment change and ISM services PMI figures will be closely watched. Signs of further weakness in US employment or service sector activity could see the ‘greenback’ surrender some of its recent gains.
Canadian dollar (CAD) strengthens alongside USD
The Canadian dollar (CAD) advanced against many major counterparts yesterday despite softer oil prices, drawing strength from its close correlation with the stronger US dollar.
Movements in crude prices and the direction of USD will likely continue to guide CAD trade today. Any pullback in US dollar strength could weigh on the ‘loonie’.
Australian dollar (AUD) unsettled by mixed data
The Australian dollar (AUD) experienced volatility overnight as investors digested conflicting domestic data. The Ai Group industry index exceeded forecasts, while the final services PMI was revised lower.
New Zealand dollar (NZD) mixed amid market uncertainty
The New Zealand dollar (NZD) also saw choppy trade overnight, fluctuating as investors grappled with shifting risk sentiment and a lack of clear directional cues.
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