Pound (GBP) directionless following UK growth forecast revision
The pound (GBP) struggled to establish a clear direction yesterday, losing ground against its stronger counterparts as markets assessed the International Monetary Fund’s (IMF) updated growth projections for the UK.
Although the IMF raised its forecast for UK growth in 2026, it made a modest downward revision to its outlook for 2027.
Today, a speech by Bank of England (BoE) Governor Andrew Bailey is the main event for GBP investors. Any hawkish comments could provide support for Sterling.
Euro (EUR) gives up gains ahead of French budget debate
The euro (EUR) initially found some support during Tuesday’s session as French bond yields declined and the common currency benefited from its negative correlation with the weakening US dollar (USD).
However, the euro subsequently surrendered its gains as markets looked ahead to France’s parliamentary debate on the 2027 budget. The proceedings could revive concerns over the country’s debt position, particularly given the prospect of opposition from parties on both the right and left.
Looking to today, European Central Bank (ECB) President Christine Lagarde is due to deliver a speech. The euro could come under pressure if she expresses concern about France’s ongoing debt crisis.
US dollar (USD) weakens as risk appetite improves
The US dollar came under pressure yesterday as improving market sentiment reduced demand for the safe-haven currency.
The more positive risk environment followed a retreat in oil prices from their recent two-week highs, while government bond markets worldwide also began to show signs of stabilisation.
For USD investors, the main focus today will be the latest US consumer price index. If inflation accelerates in September as expected, the ‘greenback’ could move higher.
Canadian dollar (CAD) recovers as oil prices rebound
The commodity-linked Canadian dollar (CAD) initially struggled yesterday as global oil prices retreated. However, crude prices rebounded during the afternoon, allowing CAD to regain some ground.
Looking ahead, Bank of Canada (BoC) Governor Tiff Macklem is scheduled to speak today, and his remarks could influence the Canadian dollar. Any suggestion that interest rate hikes may be unnecessary could weigh on CAD.
Australian dollar (AUD) strengthens as risk appetite returns
The Australian dollar (AUD) edged higher overnight as an improvement in risk appetite provided support for the ‘Aussie’.
New Zealand dollar (NZD) rises amid upbeat market sentiment
Similarly, the New Zealand dollar (NZD) moved higher during Wednesday’s Asian session as the shift towards a more positive market mood supported the currency.
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