Pound (GBP) directionless amid lack of data
The pound (GBP) traded in a mixed capacity yesterday, as an absence of UK economic releases left the currency without a clear catalyst.
This saw Sterling fluctuate across the board against its peers.
Looking ahead, the UK data calendar remains empty today. As a result, the pound may once again struggle to find a definitive direction.
Euro (EUR) supported by ECB rate hike expectations
The euro (EUR) strengthened yesterday, as the single currency drew support from European Central Bank (ECB) interest rate hike bets.
The ECB’s latest Financial Stability Review suggested that persistent inflationary pressures are likely to result in tighter monetary policy, bolstering expectations that the bank will raise rates at least twice over the coming year.
Turning to today, a further decline in Eurozone economic sentiment in May could weigh on EUR. However, any downside in the common currency may be capped if ECB President Christine Lagarde delivers hawkish commentary, or if the bank’s latest policy meeting minutes point towards tighter policy.
US dollar (USD) lifted by Middle East tensions
The safe-haven US dollar (USD) edged higher yesterday, as geopolitical uncertainty increased demand for the currency.
US-Iran tensions then intensified overnight, with both sides exchanging strikes and US President Donald Trump warning he may need to ‘finish the job’. As risk aversion swept across markets, the ‘greenback’ strengthened.
Today, attention turns to the latest core PCE price index – the Federal Reserve’s preferred inflation gauge. An acceleration in underlying price pressures could reinforce Fed interest rate hike expectations, thereby lifting USD.
Canadian dollar (CAD) fluctuates as oil prices shift
The commodity-linked Canadian dollar (CAD) initially weakened yesterday, as crude prices fell on hopes of a US-Iran peace agreement. However, CAD has since recovered these losses after renewed conflict in the Middle East pushed oil prices higher.
Movements in crude prices and developments in the Middle East are likely to remain key drivers of the ‘loonie’ today, potentially triggering volatility.
Australian dollar (AUD) weakens in risk-off trade
The Australian dollar (AUD) softened overnight as escalating tensions in the Middle East dampened market sentiment.
New Zealand dollar (NZD) falls as mood deteriorates
The New Zealand dollar (NZD) initially climbed to fresh multi-day highs overnight, before retreating as a risk-averse mood took hold.
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