Pound (GBP) mixed as political uncertainty limits gains
The pound (GBP) traded without a clear direction on Monday, advancing against fellow risk-sensitive currencies while slipping against safer alternatives.
Sterling was also held back by domestic political developments, as GBP investors continued to await official confirmation that Andy Burnham will become the UK’s next Prime Minister.
Attention now turns to a speech from Bank of England (BoE) Governor Andrew Bailey. Should Bailey continue to strike a cautious tone on monetary policy despite the renewed inflationary pressures stemming from the latest Middle East developments, the pound could come under renewed pressure.
Euro (EUR) supported by ECB tightening expectations
The euro (EUR) edged higher at the start of the week, underpinned by growing expectations that the European Central Bank (ECB) will continue raising interest rates.
Expectations of another rate increase gathered pace after the jump in energy prices triggered by the US and Iranian strikes fuelled concerns over stronger inflationary pressures across the Eurozone.
With no notable Eurozone economic releases scheduled today, broader market sentiment is likely to remain the primary driver of movement in the euro.
US dollar (USD) strengthens on US-Iran conflict
The US dollar (USD) opened Monday’s session on stronger footing as renewed fighting between the US and Iran in and around the Strait of Hormuz prompted investors to seek safe-haven assets.
Although attempts by several Middle Eastern countries to ease tensions caused the US dollar to surrender some of its initial gains, the currency recovered as US military strikes entered a third straight night.
Today’s US consumer price index will be the key focus for USD investors. If June inflation slowed by as much as markets anticipate, the US dollar could retreat.
Canadian dollar (CAD) bolstered by higher oil prices
The Canadian dollar (CAD) climbed throughout Monday’s trading, with the commodity-linked currency benefiting from a sharp rise in global oil prices.
While elevated oil prices may continue to lend support to the loonie today, further gains could be limited as markets look ahead to the Bank of Canada’s (BoC) interest rate announcement on Wednesday.
Australian dollar (AUD) boosted by upbeat confidence data
The Australian dollar (AUD) advanced overnight after the latest consumer and business confidence surveys both showed stronger-than-expected improvements in sentiment.
New Zealand dollar (NZD) supported by stronger business confidence
The New Zealand dollar (NZD) also moved higher overnight after New Zealand’s latest quarterly business confidence reading unexpectedly improved.
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