Pound (GBP) subdued as borrowing costs climb
The pound (GBP) struggled against its stronger rivals yesterday as UK government borrowing costs continued to creep higher, amid worries the Middle East crisis could drag on.
Meanwhile, Sterling’s increasingly risk-sensitive status put it on the back foot against its safer counterparts, although it did strengthen against riskier currencies.
GBP investors will be laser-focused on the Bank of England (BoE) interest rate decision today. No change to policy is expected, but the bank’s forward guidance could drive movement. A hawkish tone following the most recent developments in the Middle East could underpin the pound.
Euro (EUR) unsure amid mixed factors
The euro (EUR) was uncertain yesterday as various factors pulled on the common currency.
A deterioration in Eurozone economic sentiment pressured EUR, as did the currency’s negative correlation with the rising US dollar (USD). However, a risk-off mood lent the euro support, and the looming European Central Bank (ECB) decision limited movement.
Today is a big session for the euro, with the Eurozone’s latest GDP and inflation figures due to be published ahead of the ECB decision. Ultimately, EUR could attract support if the central bank signals that rate hikes are likely over the coming months.
US dollar (USD) buoyed by risk-off mood
The US dollar rose yesterday as a risk-off mood gripped markets. Investors were particularly unnerved by the prospect of an extended US blockade of the Strait of Hormuz.
The Federal Reserve’s interest rate decision also lent USD support, as the central bank left rates unchanged and signs of a hawkish split among policymakers emerged.
Looking ahead, the preliminary estimate for US GDP growth in the first quarter of 2026 is scheduled for release later today. A forecast acceleration in growth could see the ‘greenback’ strengthen.
Canadian dollar (CAD) firms as oil prices climb
The crude-linked Canadian dollar (CAD) ticked higher yesterday amid rising oil prices. Meanwhile, the Bank of Canada’s (BoC) rate decision caused a small wobble in CAD exchange rates, despite the bank leaving policy untouched as expected.
Attention turns to Canada’s latest GDP figures today. Could a contraction in growth in March see the ‘loonie’ stumble?
Australian dollar (AUD) recovery stifled by risk-off mood
Having weakened notably yesterday, the Australian dollar (AUD) attempted to rebound overnight, although a risk-off mood limited the currency’s recovery.
New Zealand dollar (NZD) pressured by business confidence slump
The New Zealand dollar (NZD) also tried to recover overnight, but a plunge in New Zealand business confidence from 32.5 in March to -10.6 in April dented NZD.
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