Pound (GBP) strengthens following BoE rate decision
The pound (GBP) jumped on Thursday after the Bank of England (BoE) voted unanimously to keep interest rates on hold, as it warned of the inflationary shock posed by the war in Iran.
GBP investors then seized on the bank’s comments suggesting it ‘stands ready to act’ to keep inflation under control, raising bets the BoE could now deliver two rate hikes in 2026, despite BoE Governor Bailey warning markets against reaching ‘any strong conclusions’.
The Confederation of British Industry (CBI) will publish its latest industrial orders data today, with the pound potentially weakening if we see a fresh decline in the UK’s total order book balance this month.
Euro (EUR) rises as ECB raises inflation forecast
The euro (EUR) also firmed yesterday, with the delivery of the European Central Bank’s (ECB) own interest rate decision.
The ECB also kept rates on hold this month and warned about the risks posed by the war in Iran, while raising its average inflation forecast for 2026 to 2.6%.
The publication of Germany’s producer price index looks to weigh on the euro today, after reporting that factory input inflation fell more than forecast in February.
US dollar (USD) rocked by Middle East uncertainty
Trade in the US dollar (USD) was choppy on Thursday, amid rising tensions in the Middle East and concerns that US control over the situation is slipping.
This overshadowed a surprise fall in US jobless claims last week, which may have otherwise strengthened the ‘greenback’.
US economic releases are in short supply today, likely leaving movement in the US dollar to be dictated by wider market trends through the remainder of the week.
Canadian dollar (CAD) slips amid oil price volatility
The Canadian dollar (CAD) struggled to attract any meaningful support yesterday amid significant volatility in oil prices, which climbed as high as $117 a barrel, before slumping back below $110.
Closing out this week’s session is the publication of Canada’s latest retail sales figures. Sales growth is expected to have contracted in February, potentially piling pressure on the ‘loonie’.
Australian dollar (AUD) firms as risk appetite improves
The Australian dollar (AUD) ticked higher overnight on Thursday amid some cautious optimism regarding the war in Iran, with Israeli Prime Minister Benjamin Netanyahu suggesting the war may end sooner than many expect.
New Zealand dollar (NZD) strengthens in risk-positive trade
The New Zealand dollar (NZD) also rallied in overnight trade as a slight easing of tensions in the Middle East bolstered market risk appetite.
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