Pound (GBP) strengthens as political concerns ease
The pound (GBP) advanced against most of its rivals yesterday, as investors continued to unwind the political risk premium that had weighed on Sterling over recent months.
This came amid growing certainty that Andy Burnham will enter Downing Street without facing a leadership contest, alongside expectations that he will stick to Labour’s existing fiscal rules.
Looking ahead, Bank of England (BoE) Governor Andrew Bailey is due to speak later today. Earlier this week, Bailey indicated that interest rate cuts are currently ‘off the table’. Should he deliver another hawkish message this afternoon, the pound could push higher.
Euro (EUR) lifted by weaker USD
The euro (EUR) initially came under pressure yesterday as European Central Bank (ECB) interest rate hike bets cooled.
However, the single currency later recovered, supported primarily by its strong negative correlation with the US dollar (USD).
Today, EUR investors will turn their attention to a speech from ECB President Christine Lagarde for fresh direction. If Lagarde maintains the hawkish tone she struck earlier in the week, the euro may strengthen.
US dollar (USD) tumbles after disappointing payrolls
The US dollar slumped yesterday after the latest US non-farm payrolls report showed that the US economy added just 57,000 jobs in June, falling well short of forecasts for a 110,000 increase.
The weaker-than-expected data prompted a sharp correction in USD, as markets slashed the odds of a Federal Reserve interest rate hike before the summer from around 70% to below 50%.
US markets are closed today for the long Independence Day weekend, which is likely to create thinner trading conditions and limit movement in the US dollar.
Canadian dollar (CAD) weakens as oil prices remain under pressure
The Canadian dollar (CAD) softened on Thursday, with the commodity-linked currency undermined as Brent crude prices slipped back to $70 a barrel.
Looking ahead, if global oil prices continue to fall, the ‘loonie’ is likely to remain on the defensive through to the end of the week.
Australian dollar (AUD) supported by risk-on trade
The Australian dollar (AUD) strengthened overnight, lifted by an upbeat market mood and upwardly revised PMI figures.
New Zealand dollar (NZD) rises as consumer confidence improves
The New Zealand dollar (NZD) also climbed last night, with NZD benefitting from the positive tone in markets and a stronger-than-expected improvement in New Zealand consumer confidence.
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