Pound (GBP) climbs after BoE rate decision
The pound (GBP) surged on Thursday after the Bank of England (BoE) unanimously voted to keep interest rates unchanged, while highlighting the inflationary risks stemming from the conflict in Iran.
Sterling demand was further boosted as investors focused on the bank’s signal that it ‘stands ready to act’ to contain inflation, fuelling speculation that the BoE may deliver two rate hikes in 2026, despite Governor Andrew Bailey cautioning against drawing firm conclusions.
The Confederation of British Industry (CBI) is due to release its latest industrial trends orders data today, with the pound potentially coming under pressure if the UK’s total order book balance declines again this month.
Euro (EUR) advances as ECB lifts inflation outlook
The euro (EUR) also strengthened yesterday following the European Central Bank’s (ECB) latest policy announcement.
Like the BoE, the ECB left interest rates unchanged, while warning about the inflationary implications of the war in Iran and lifting its average inflation forecast for 2026 to 2.6%.
Germany’s latest producer price index could weigh on the euro today after showing factory input inflation fell by more than expected in February.
US dollar (USD) unsettled by Middle East tensions
The US dollar (USD) experienced volatile trading on Thursday as escalating tensions in the Middle East and concerns over waning US influence unsettled markets.
This overshadowed a better-than-expected drop in US jobless claims last week, which might otherwise have supported the ‘greenback’.
With limited US data due for release, the US dollar may take its direction from broader market sentiment through the remainder of the week.
Canadian dollar (CAD) pressured by oil price swings
The Canadian dollar (CAD) struggled to gain traction yesterday amid sharp fluctuations in oil prices, which briefly surged to $117 per barrel before retreating below $110.
Canada’s latest retail sales figures will be released later today, with forecasts pointing to a contraction in February that could add further pressure on the ‘loonie’.
Australian dollar (AUD) edges higher on improving sentiment
The Australian dollar (AUD) inched higher overnight on Thursday amid cautious optimism surrounding the situation in Iran, with Israeli Prime Minister Benjamin Netanyahu suggesting the conflict could conclude sooner than anticipated.
New Zealand dollar (NZD) gains as sentiment improves
The New Zealand dollar (NZD) also advanced in overnight trade as a slight easing in Middle East tensions supported an improvement in overall market risk appetite.