Pound (GBP) uncertain in absence of data
The pound (GBP) traded without a clear direction yesterday as a lack of UK data left Sterling rudderless.
Additionally, a gloomy market mood put pressure on the increasingly risk-sensitive pound, while hopes the UK would be less affected by US tariffs offset GBP’s losses.
The UK’s final services PMI could impact the pound this morning, if it differs from preliminary estimates. Later on, any hawkish comments from Bank of England (BoE) Governor Andrew Bailey could support Sterling.
Euro (EUR) buoyed by USD weakness
The euro (EUR) strengthened yesterday, with the single currency attracting support thanks to its negative correlation with the US dollar (USD).
The safer euro also benefitted from the downbeat market mood, with EUR firming against riskier rivals.
This morning, EUR is currently on the front foot as Germany’s incoming coalition agreed to loosen debt rules to unlock investment. However, the Eurozone’s final services PMI could weigh on the euro if it confirms that services activity slowed last month.
US dollar (USD) dented by fears of US recession
The US dollar faced selling pressure yesterday, despite the risk-off mood, amid concerns that US tariffs and retaliatory measures from other countries could tip the American economy into recession.
These concerns about the US economy also saw markets ramp up bets on more Federal Reserve interest rate cuts, with the odds of a May rate cut rising from around 36% to 48%.
The focus for USD investors in the session ahead will likely be the ISM services PMI, due out this afternoon. If activity in the American services sector remained robust last month, the ‘greenback’ could regain ground.
Canadian dollar (CAD) strikes multi-year lows as tariffs hit Canada
The Canadian dollar (CAD) remained under intense pressure yesterday, hitting multi-year lows against some peers, as CAD investors continue to react to the implementation of Trump’s tariffs.
Looking ahead, another downbeat services PMI from Canada could pressure the ‘loonie’ this afternoon.
Australian dollar (AUD) subdued despite stronger GDP
The Australian dollar (AUD) struggled overnight, despite a larger-than-forecast acceleration in Australian GDP in the fourth quarter, as trade war fears continued to weigh on markets.
New Zealand dollar (NZD) pressured by risk aversion
The New Zealand dollar (NZD) was also muted in overnight trade, with the downbeat mood pressuring the risk-sensitive ‘kiwi’.
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