Pound (GBP) slides after UK inflation data
The pound (GBP) weakened yesterday as investors digested a softer-than-expected UK consumer price index.
Headline inflation remained at 2.8% in May, rather than accelerating to 3% as forecast, while core inflation increased by less than markets had anticipated. The figures dented expectations for a Bank of England (BoE) interest rate hike later this year, dragging GBP lower.
Sterling could see notable volatility today, with the BoE’s interest rate decision and the Makerfield by-election both in focus. Overall, the pound may come under further pressure.
Euro (EUR) pressured by USD strength
The euro (EUR) softened modestly yesterday, as its negative correlation with the US dollar (USD) weighed on the single currency while USD strengthened.
At the same time, an absence of notable Eurozone economic releases left EUR without a clear source of support.
With Eurozone data remaining scarce today, the common currency may struggle to establish a firm direction.
US dollar (USD) surges as Fed signals future hikes
The US dollar strengthened yesterday after US retail sales rose from 0.4% in April to 0.9% in May, comfortably beating forecasts of 0.5% growth.
The ‘greenback’ then jumped higher in the evening after the Federal Reserve left interest rates unchanged but revised its projections to point to possible rate hikes ahead.
Today, USD investors may turn their focus back to developments in the Middle East. The ‘greenback’ could pare some of yesterday’s gains after the US and Iran signed an interim peace agreement to bring the war to an end.
Canadian dollar (CAD) subdued despite firmer oil prices
The commodity-linked Canadian dollar (CAD) remained under pressure yesterday, with a modest rebound in crude prices failing to lift the ‘loonie’, although it helped CAD avoid deeper losses against some peers.
Canada’s latest producer price inflation data is scheduled for release today. A strong factory gate inflation reading for May could lend CAD support if it fuels speculation that the Bank of Canada (BoC) may need to consider raising interest rates later this year.
Australian dollar (AUD) strengthens as sentiment improves
The Australian dollar (AUD) edged higher overnight as market sentiment improved following the signing of the interim peace deal to end the US-Iran war.
New Zealand dollar (NZD) supported by GDP data
The New Zealand dollar (NZD) initially climbed overnight after stronger New Zealand GDP figures. However, the ‘kiwi’ was unable to sustain its gains.
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