Pound (GBP) advances on Chancellor appointment speculation
The pound (GBP) strengthened yesterday after Sterling investors welcomed reports suggesting incoming Prime Minister Andy Burnham is expected to choose Shabana Mahmood, rather than Ed Miliband, as Chancellor of the Exchequer.
Miliband had previously been the favourite to take the Treasury role but is viewed as less market-friendly than Mahmood, with investors anticipating that Mahmood would take a more fiscally prudent approach.
Attention now turns to the UK’s latest GDP figures, which printed as expected to show a 0.1% recovery in May. This could provide the pound with modest support during today’s session.
Euro (EUR) edges higher despite mixed economic release
The euro (EUR) traded unevenly at first yesterday after Eurozone industrial production unexpectedly fell in May, although April’s reading was revised upwards.
Despite the mixed data, the single currency found support later in the session as the US dollar (USD) weakened, reflecting the euro’s strong inverse relationship with its US counterpart.
There are no major Eurozone data releases scheduled for today, which may leave the single currency lacking a clear catalyst and trading in a narrow range.
US dollar (USD) weakens as cooling inflation weighs on sentiment
The US dollar stayed on the defensive yesterday as markets continued to digest Tuesday’s sharp slowdown in US inflation, which remained a drag on USD exchange rates.
Additional pressure came from an unexpected fall in US producer prices, with June’s monthly PPI reading coming in at -0.3%.
Looking ahead, the publication of June’s US retail sales figures could influence the US dollar later today. A slowdown in consumer spending may place further pressure on USD.
Canadian dollar (CAD) eases after BoC holds rates
The Canadian dollar (CAD) weakened yesterday after the Bank of Canada (BoC) left interest rates unchanged while maintaining a broadly cautious tone.
With no notable Canadian data due today, oil price movements are likely to be the primary driver of CAD exchange rates. Should crude prices strengthen, the commodity-linked ‘loonie’ may also advance.
Australian dollar (AUD) retreats as inflation expectations soften
The Australian dollar (AUD) edged lower overnight after Australian consumer inflation expectations unexpectedly declined in July.
New Zealand dollar (NZD) holds firm despite subdued risk appetite
The New Zealand dollar (NZD) was little changed overnight, with the ‘kiwi’ continuing to find support despite a mixed market backdrop.
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