Pound (GBP) climbs as UK gilt yields retreat
The pound (GBP) strengthened against most major currencies yesterday, drawing support from a sharp decline in UK 10-year government bond yields to their lowest levels since early September.
The drop in borrowing costs was attributed to a steep decline in oil prices, alongside growing expectations that the Bank of England (BoE) will begin a fresh interest rate hiking cycle on Thursday.
Looking ahead, the pound could receive an additional boost today following reports that the UK and EU have reached a draft agreement aimed at easing some of the post-Brexit trade restrictions affecting food and agricultural exports.
Euro (EUR) supported by weaker US dollar
The euro (EUR) made significant gains on Monday, with the single currency benefiting from its inverse relationship with the US dollar (USD).
This helped the euro brush aside concerns raised late last week after credit rating agency Fitch downgraded its outlook on French sovereign debt from stable to negative.
With little in the way of notable Eurozone economic releases on the calendar, however, the single currency may find it difficult to extend its advance today.
US dollar (USD) slides as risk appetite improves
The US dollar (USD) came under considerable pressure at the beginning of the week, as a sharp drop in oil prices reduced demand for the safe-haven currency.
The ‘greenback’ subsequently recovered some ground after the latest ISM manufacturing PMI revealed that activity across the US factory sector expanded by more than expected last month.
Looking to today, political uncertainty surrounding the US mid-term elections could discourage investors from buying the dollar as polling stations open across the country.
Canadian dollar (CAD) weakens alongside oil prices
The oil-sensitive Canadian dollar (CAD) was one of the weaker-performing major currencies on Monday, as global crude prices slumped by more than 6% amid renewed optimism over the prospects of a diplomatic resolution to the conflict in the Middle East.
The ‘loonie’ is likely to remain closely tied to movements in the oil market today, with any further declines in crude prices potentially adding to selling pressure on CAD.
Australian dollar (AUD) slips after dovish RBA hike
The Australian dollar (AUD) weakened during overnight trade after the Reserve Bank of Australia (RBA) delivered an interest rate increase following a split vote, while also striking a relatively dovish tone in its forward guidance.
New Zealand dollar (NZD) advances as risk appetite returns
The New Zealand dollar (NZD) moved higher overnight, supported by an improvement in broader market sentiment and easing concerns surrounding the domestic political outlook.
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