Pound (GBP) supported despite cautious BoE commentary
The pound (GBP) strengthened modestly yesterday, although Sterling’s gains appeared to be driven more by weakness elsewhere than by any notable GBP strength.
Markets largely shrugged off remarks from Bank of England (BoE) Governor Andrew Bailey. Although Bailey reiterated a careful approach to further rate rises, he also stated that rate cuts were ‘off the table’ and suggested that the earlier jump in energy costs could still feed through into inflation with a lag.
With UK economic releases in short supply today, the pound may find it difficult to establish a clear trajectory.
Euro (EUR) weakens after softer inflation data
The euro (EUR) declined yesterday after the Eurozone’s latest consumer price index weighed on European Central Bank (ECB) rate hike expectations.
June’s preliminary inflation figures showed headline inflation cooling more sharply than anticipated, falling from 3.2% to 2.8%. Meanwhile, core inflation unexpectedly eased from 2.6% to 2.4%.
Looking ahead, the Eurozone’s latest unemployment figures could offer EUR some modest support later this morning if they confirm that joblessness in the bloc remained low in May.
US dollar (USD) retreats as data underwhelms
The US dollar (USD) weakened yesterday as disappointing US data and remarks from Federal Reserve Chair Kevin Warsh pressured the currency.
The latest ADP employment change reading indicated that jobs growth slowed more sharply than expected in June, while the ISM manufacturing PMI revealed an unexpected loss of momentum in the factory sector. At the same time, Warsh suggested that inflation risks in the US have eased.
For USD investors, attention now turns to the latest non-farm payrolls report. Forecasts for slower employment growth could keep the American dollar subdued, although any surprise result may trigger sharper volatility.
Canadian dollar (CAD) mixed as oil prices decline
The commodity-linked Canadian dollar (CAD) traded unevenly yesterday, with the ‘loonie’ managing to hold its ground against weaker rivals despite another fall in crude prices.
Today, Canada’s latest manufacturing PMI may drive CAD movement. A stronger reading for factory activity in June could lift the Canadian dollar, although shifts in oil prices may continue to muddy the waters.
Australian dollar (AUD) muted despite poor trade figures
The Australian dollar (AUD) lacked a clear direction overnight amid mixed market sentiment, with the ‘Aussie’ largely ignoring an unexpected drop in Australian exports in May.
New Zealand dollar (NZD) trapped in narrow range amid subdued mood
The New Zealand dollar (NZD) also traded in a tight range last night, as an uncertain market mood left NZD without a clear catalyst.
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