Pound (GBP) advances despite gilt market volatility
The pound (GBP) edged higher against most of its peers at the end of last week, even as UK borrowing costs continued to climb.
An increase in 10-year gilt yields on Friday effectively reversed the decline seen after the US-Iran ceasefire announcement, renewing concerns over how the UK government might finance additional energy support measures later this year.
Although UK economic releases are limited at the start of this week, Sterling could find support from reports that the government is considering aligning more closely with EU single market regulations to strengthen trade ties.
Euro (EUR) lifted by Russia-Ukraine truce
The euro (EUR) moved broadly higher during Friday’s session, partly supported by its inverse correlation with the US dollar (USD).
Further support came from a temporary ceasefire between Ukraine and Russia over Orthodox Easter, marking the first pause in hostilities since the conflict began in 2022.
At the start of this week, the outcome of Hungary’s election may influence the euro, with hopes that a victory for Peter Magyar could reduce Hungary’s opposition within the EU.
US dollar (USD) dips as core inflation underwhelms
The US dollar softened toward the end of last week after the latest US consumer price index showed headline inflation rising sharply, while core inflation came in below expectations.
If the Federal Reserve interprets the increase in headline inflation as a temporary energy-driven spike, the weaker core reading may not be enough to justify tighter monetary policy.
However, the US dollar has already recovered these losses this morning, as sentiment deteriorated over the weekend following the collapse of peace talks and a renewed escalation in geopolitical tensions.
Canadian dollar (CAD) steady on mixed labour data
The Canadian dollar (CAD) traded sideways on Friday after Canada’s latest employment figures showed a smaller-than-expected increase in jobs, while the unemployment rate held steady against expectations for a rise in March.
Looking ahead, the ‘loonie’ could strengthen today after US President Donald Trump threatened to block Iranian shipping through the Strait of Hormuz, prompting a fresh rally in oil prices.
Australian dollar (AUD) weakens amid risk aversion
The Australian dollar (AUD) declined during Monday’s Asian session as the breakdown in US-Iran negotiations dampened global risk appetite.
New Zealand dollar (NZD) softens on geopolitical tensions
The New Zealand dollar (NZD) also edged lower in overnight trade as renewed uncertainty in the Middle East encouraged a shift toward safer assets.
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