Pound (GBP) undermined by rising bonds
The pound (GBP) was muted yesterday as strengthening bond prices revived concerns over the UK’s fiscal outlook.
Speculation is growing about the potential tax levers Chancellor Rachel Reeves will pull to cover a growing gap in public finances and how they may impact growth.
The UK’s consumer price index will be in focus for GBP investors today. Inflation accelerated again in July, reinforcing recent hawkish Bank of England (BoE) interest rate bets and potentially lifting the pound through today’s session.
Euro (EUR) lifted by Ukraine peace deal hopes
The euro (EUR) traded with modest gains on Tuesday amid tentative hopes that a Ukraine-Russia peace deal may be closer than previously thought.
This upside in EUR was also supported by a surprising expansion of the Eurozone’s current account surplus.
Looking ahead, EUR investors will look to a speech by European Central Bank (ECB) President Christine Lagarde for fresh impetus today. A broadly hawkish tone could help to bolster the euro.
US dollar (USD) flat amid cautious optimism
The US dollar’s (USD) initial gains were quickly erased yesterday as apparent progress in the Ukraine peace process helped to underpin a mild improvement in risk appetite.
At the same time, comments from Treasury Secretary Scott Bessent regarding the benefits of a Federal Reserve rate cut for the US housing market also dragged on USD.
Ahead of the Fed’s annual Jackson Hole Symposium in the latter half of the week, today sees the publication of the minutes from the US central bank's July policy meeting. If policymakers are shown to be growing more open to cuts, the US dollar is likely to weaken.
Canadian dollar (CAD) slides on weak inflation print
The Canadian dollar (CAD) retreated on Tuesday as a softer-than-expected domestic inflation print stoked Bank of Canada (BoC) rate cut bets.
CAD data is in short supply today, but the ‘loonie’ may extend its losses if oil prices continue to slide.
Australian dollar (AUD) dragged down by USD recovery
The Australian dollar (AUD) softened overnight as a rising US dollar dampened demand for the risk-sensitive ‘Aussie’.
New Zealand dollar (NZD) plummets following RBNZ rate cut
The New Zealand dollar (NZD) plunged overnight after the Reserve Bank of New Zealand (RBNZ) lowered interest rates by 25bps and indicated that further cuts are possible.
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