Pound (GBP) weighed down by surge in UK borrowing costs
The pound (GBP) came under significant pressure at the end of last week as volatility gripped the UK bond market.
Yields on 10-year government bonds jumped sharply on Friday, reaching their highest level since 2008 amid persistent inflation concerns and expectations that the Bank of England (BoE) could deliver as many as three rate hikes this year.
Sterling may struggle to find clear direction today as investors await a run of key UK economic data releases later in the week.
Euro (EUR) supported by ECB tightening bets
The euro (EUR) advanced against most major currencies on Friday after a Bloomberg report indicated the European Central Bank (ECB) could consider raising interest rates in April if inflation accelerates sharply in March.
However, the upside in the single currency was limited by its inverse relationship with the US dollar (USD).
Looking ahead, the Eurozone’s latest consumer confidence figures may weigh on the euro today, as the ongoing conflict in the Middle East is expected to dent sentiment.
US dollar (USD) strengthens as Middle East tensions rise
The US dollar firmed toward the end of last week as escalating geopolitical tensions boosted demand for safe-haven assets.
Reports that the US is preparing to deploy additional troops to the Middle East, including thousands of Marines, added to speculation that the Trump administration may be considering plans to seize Iran’s Kharg Island to restrict its oil revenues.
At the start of this week, the US dollar is likely to remain sensitive to developments in the region, with recent rhetoric from Donald Trump continuing to underpin its safe-haven appeal.
Canadian dollar (CAD) lifted by strong retail sales
The Canadian dollar (CAD) edged higher on Friday, supported by a better-than-expected rise in domestic retail sales in February.
With limited Canadian data due, the ‘loonie’ may experience a volatile start to the week as movements in oil prices are likely to remain the primary driver.
Australian dollar (AUD) slides on Iran tensions
The Australian dollar (AUD) began the week on a weak footing, as a fresh escalation in Middle East tensions dampened risk appetite during Monday’s Asian session.
New Zealand dollar (NZD) falls amid risk aversion
The New Zealand dollar (NZD) also moved lower in overnight trading as investors pulled back from risk-sensitive assets amid fears of further escalation in the conflict involving Iran.
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