Pound (GBP) undermined by budget jitters
The pound (GBP) struggled to attract support yesterday as a notable rise in UK bond yields raised fresh concerns over the government’s autumn budget.
The rise in yields followed a minor reshuffle in Downing Street, with the resulting increase in borrowing costs likely to eat into Chancellor Rachel Reeves’s fiscal headroom.
If UK bond yields continue to climb, it's likely demand for the pound will remain limited today.
Euro (EUR) flat despite upwardly revised PMI
The euro (EUR) traded sideways on Monday as the Eurozone’s latest manufacturing PMI offered only limited support for the single currency.
This is despite the index being revised up from 50.5 to 50.7 in August, confirming the bloc’s fastest factory sector growth since June 2022.
Coming up, the Eurozone’s latest consumer price index will be in focus today. If August’s inflation figures surprise to the upside, mirroring the rise we saw in Germany last week, then the euro is likely to strengthen.
US dollar (USD) dips amid thin liquidity
The US dollar (USD) ticked lower throughout yesterday’s session, as the Labor Day holiday led to thin trading conditions for the ‘greenback’.
This limited the impact of a federal appeals court ruling that stated US President Donald Trump’s tariff measures are illegal.
As US markets reopen today, we could see the latest ISM manufacturing PMI exert pressure on the US dollar as August’s index is expected to report the US factory sector suffered its sixth consecutive slump.
Canadian dollar (CAD) muted in Labour Day lull
The Canadian dollar (CAD) was confined to a narrow range on Monday, as Canada also observed Labour Day, with thin liquidity limiting CAD volatility.
Turning to today’s session, amid a lull in domestic data, the ‘loonie’ is likely to move in tandem with oil prices.
Australian dollar (AUD) slides as risk demand softens
The Australian dollar (AUD) trended lower overnight on Monday, with demand for the high-yield currency faltering as market risk appetite was suppressed by a recovery in the US dollar.
New Zealand dollar (NZD) dented by market jitters
The New Zealand dollar (NZD) also fell back in overnight trade as a more cautious market mood sapped the appeal of the ‘kiwi’.
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