Pound (GBP) tumbles after UK inflation undershoots
The pound (GBP) fell sharply yesterday after the UK’s November consumer price index came in below expectations, reinforcing bets that the Bank of England (BoE) will cut interest rates.
Headline inflation slowed from 3.6% to 3.2%, a steeper decline than the 3.5% forecast, while core inflation also surprised to the downside, easing from 3.4% to 3.2%.
The focus now shifts to today’s BoE policy announcement. Markets have almost fully priced in a 25bps rate cut, but Sterling could face additional pressure if policymakers strike a notably dovish tone.
Euro (EUR) swings as ECB meeting approaches
The euro (EUR) dipped initially yesterday, weighed down by its strong inverse relationship with a firmer US dollar (USD).
However, the single currency recovered later in the session as USD gave up ground and investors turned their attention to today’s European Central Bank (ECB) decision.
The ECB is widely expected to keep rates on hold, though analysts anticipate upgrades to growth forecasts and a marginally more hawkish stance than at previous meetings, which could offer support to the euro.
US dollar (USD) pulls back on dovish Fed signals
The US dollar strengthened early yesterday amid a cautious market mood and a partial unwinding of Federal Reserve rate cut expectations.
Momentum faded in the afternoon, however, as risk sentiment improved and dovish remarks from Fed policymaker Christopher Waller undermined demand for the safe-haven currency.
Later today, the latest US CPI release could drive fresh USD movement. Softer inflation may weigh on the currency, while persistent price pressures would likely provide a boost.
Canadian dollar (CAD) falters despite firmer oil prices
The oil-sensitive Canadian dollar (CAD) lacked clear direction yesterday and even struggled to hold gains against weaker peers, despite a rise in crude prices.
With no major Canadian data due again today, further strength in oil could help CAD edge higher.
Australian dollar (AUD) unsteady amid USD rebound and commodity strength
The Australian dollar (AUD) dipped overnight as the US dollar recovered, although gains in commodity prices helped AUD claw back some of its early losses.
New Zealand dollar (NZD) slips in spite of solid GDP
The New Zealand dollar (NZD) softened overnight despite stronger-than-expected GDP data. A 1.1% rebound in the economy during the third quarter failed to alter expectations for Reserve Bank of New Zealand (RBNZ) policy, limiting the currency’s appeal.
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