Pound (GBP) supported as markets dial back BoE rate cut bets
The pound (GBP) moved within a broad range yesterday but still advanced against several counterparts as investors trimmed their expectations for a Bank of England (BoE) interest rate cut.
Surging oil and gas prices prompted markets to reassess the outlook for monetary policy, with the probability of a March rate cut dropping sharply from 80% last week to around 29% this week.
Looking ahead, the UK’s final services PMI for February could provide some support for Sterling if it confirms that activity in Britain’s dominant services sector remained resilient last month.
Euro (EUR) pressured despite stronger inflation data
The euro (EUR) weakened against its stronger peers yesterday as the single currency struggled against a surging US dollar (USD), reflecting their strong inverse relationship.
Even though Eurozone inflation came in hotter than forecast, the data failed to generate a meaningful upside for EUR. Nevertheless, the common currency was able to record gains against more risk-sensitive rivals.
Attention now turns to the Eurozone’s unemployment rate for January. Forecasts suggest joblessness remained at a record low, which may help offer the euro some support later today.
US dollar (USD) climbs further as geopolitical tensions rise
The US dollar continued its advance yesterday, with the dollar index reaching a six-week high as investors flocked to the safe-haven ‘greenback’ amid growing global uncertainty.
Heightened tensions in the Middle East unsettled markets, following fresh US strikes on Iran and an Israeli ground offensive in Lebanon.
Later today, the focus will shift to the US ISM services PMI for February. A stronger reading could give the US dollar additional momentum, while ongoing risk aversion may also keep demand for the currency elevated.
Canadian dollar (CAD) reaches multi-week highs as oil rallies
The oil-linked Canadian dollar (CAD) climbed to multi-week highs yesterday as crude prices extended their rally amid escalating tensions in the Middle East.
Canada’s services PMI will be in focus later today. If the data indicates the sector remains in contraction, the ‘loonie’ could face some pressure, although elevated oil prices may help cushion any downside.
Australian dollar (AUD) muted despite upbeat GDP
The Australian dollar (AUD) traded unevenly overnight, with the ‘Aussie’ struggling to gain traction even after GDP data exceeded expectations, as a cautious market mood limited demand for riskier currencies.
New Zealand dollar (NZD) unsettled by cautious market tone
The New Zealand dollar (NZD) also fluctuated overnight. Despite the risk-sensitive ‘kiwi’ facing a subdued market environment, it managed to hold steady and avoid notable losses.
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