Pound (GBP) edges lower amid political uncertainty
The pound (GBP) weakened yesterday, despite stronger-than-expected UK employment figures, as investors grew concerned about how new Prime Minister Andy Burnham intends to finance his fiscal agenda.
Burnham named John Healey as Chancellor of the Exchequer instead of the market-backed favourite, Shabana Mahmood. At the same time, reports suggesting the Prime Minister is preparing to unveil tax cuts later this week prompted fresh speculation over how these measures would be funded.
Looking ahead, the spotlight turns to the UK’s latest consumer price index. The pound could come under pressure after headline inflation came in below expectations, although stable core inflation may help to curb any losses.
Euro (EUR) muted despite upbeat German figures
The euro (EUR) lacked clear momentum yesterday, even after stronger-than-forecast economic data from Germany.
Germany’s latest ZEW economic sentiment index comfortably beat expectations, climbing from 10.5 to a five-month high of 26.3 in July. Despite the encouraging release, the euro was unable to make meaningful gains against stronger rivals.
With no notable Eurozone data due today and the European Central Bank’s (ECB) interest rate announcement approaching tomorrow, trading in the euro may remain subdued.
US dollar (USD) fluctuates as investors assess US-Iran developments
The safe-haven US dollar (USD) came under initial pressure yesterday as investors maintained a relatively positive appetite for risk despite escalating tensions in the Middle East.
Later in the session, however, the ‘greenback’ recovered the ground it had lost.
As there are few US economic releases scheduled today, broader market sentiment is likely to dictate movement in the US dollar. Should the situation in the Middle East deteriorate further, demand for the safe-haven ‘greenback’ may strengthen.
Canadian dollar (CAD) supported by higher oil prices
The Canadian dollar (CAD) came under pressure yesterday after US President Donald Trump revealed plans to introduce a 50% tariff on most Canadian imports.
However, an upswing in crude prices lent support to the commodity-linked ‘loonie’, helping to offset some of its earlier losses.
In the absence of domestic data, oil price movements are likely to remain the primary driver of the Canadian dollar today. Ongoing US-Canada trade tensions could also continue to weigh on the ‘loonie’.
Australian dollar (AUD) slips amid cautious market sentiment
The Australian dollar (AUD) edged lower during overnight trade as a more cautious market mood weighed on the risk-sensitive ‘Aussie’.
New Zealand dollar (NZD) weakens as risk appetite fades
The New Zealand dollar (NZD) also drifted lower during Wednesday’s Asian session as investors became more risk averse.
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