Pound (GBP) advances as jobs data fuels BoE rate hike expectations
The pound (GBP) gained ground yesterday as stronger-than-expected employment figures prompted markets to increase their bets on Bank of England (BoE) interest rate hikes.
UK unemployment unexpectedly declined in the three months to August, strengthening expectations that the BoE will raise interest rates in November, followed by a further three increases next year.
Looking ahead to today, Sterling could receive another boost after the UK’s latest inflation figures came in above forecasts. However, concerns over government borrowing exceeding expectations could cap the pound’s gains.
Euro (EUR) weakens after disappointing German figures
The euro (EUR) fell yesterday after Germany’s latest ZEW economic sentiment index revealed that confidence had deteriorated more sharply than anticipated in October.
The single currency also faced headwinds from social unrest across several European countries and France’s ongoing debt crisis. However, its negative correlation with the weakening US dollar (USD) helped limit its losses.
Political uncertainty and fears of a fiscal crisis in France could continue to weigh on the common currency today. A speech by European Central Bank (ECB) President Christine Lagarde may also influence EUR exchange rates.
US dollar (USD) retreats amid domestic market and political uncertainty
The US dollar came under pressure yesterday as persistent weakness in US equity markets and political uncertainty ahead of the midterm elections weighed on demand for the currency.
Meanwhile, the latest weekly employment change figures from ADP indicated that US job creation was losing momentum, adding to the pressure on the ‘greenback’.
With little US economic data due today, broader market developments may remain the main driver of the US dollar. If current concerns persist, the currency could face further losses.
Canadian dollar (CAD) strengthens as oil prices reach multi-month peaks
The commodity-linked Canadian dollar (CAD) advanced yesterday as Brent crude prices climbed to fresh multi-month highs. However, the currency surrendered some of its gains later in the evening as oil prices retreated from their peaks.
Oil market movements are likely to remain an important influence on the Canadian dollar today, with few domestic economic releases to provide direction. CAD could make further gains if crude prices continue to hold at elevated levels.
Australian dollar (AUD) rises following hawkish RBA comments
The Australian dollar (AUD) strengthened overnight after Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser cautioned that further interest rate increases may be necessary to keep inflation expectations anchored.
New Zealand dollar (NZD) trades flat amid mixed market signals
The New Zealand dollar (NZD) moved within a narrow range during Wednesday’s Asian session, with a quiet domestic economic calendar and mixed market sentiment leaving the currency without a clear direction.
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