Pound (GBP) unclear following mixed borrowing data
The pound (GBP) traded without a clear direction yesterday, with Sterling rising against weaker peers, amid mixed data on the UK government finances.
Although borrowing swelled in September, the Office for Budget Responsibility (OBR) said that improved tax receipts have eased pressures, with borrowing expected to decline though the second half of the year.
Turning to today, the pound has plunged this morning as cooler-than-forecast UK inflation data prompts markets to rethink Bank of England (BoE) interest rate cut bets. Headline inflation held at 3.8% in September, rather than rising to 4%, while core inflation eased from 3.6% to 3.5%, rather than increasing to 3.7%.
Euro (EUR) undermined by USD correlation
The euro (EUR) fell against its stronger peers yesterday as the common currency was pressured by its negative correlation with the US dollar (USD).
Meanwhile, a lack of Eurozone data somewhat muted the euro’s movement.
European Central Bank (ECB) President Christine Lagarde and Vice-President Luis de Guindos are due to deliver speeches today. A hawkish consensus could support EUR exchange rates.
US dollar (USD) firms as economic fears ease
The US dollar marched higher yesterday as recent concerns about the US credit market eased.
In addition, US-China trade tensions continued to cool, with US President Donald Trump saying he was sure the two sides will reach a ‘fantastic deal’.
Global risk dynamics could drive the ‘greenback’ today, as US data is absent from the economic calendar. Could a gloomy mood boost USD?
Canadian dollar (CAD) rises as inflation beats forecasts
The Canadian dollar (CAD) rose yesterday, with the ‘loonie’ initially supported by a rise in oil prices and then by hotter-than-forecast Canadian inflation in the afternoon.
Today, the commodity-linked Canadian dollar could be primarily influenced by oil prices. If crude continues to climb, CAD could also gain ground.
Australian dollar (AUD) buoyed by China stimulus hopes
The Australian dollar (AUD) edged higher overnight, despite a risk-off market mood, as rising commodity prices and hopes of more stimulus measures from China helped to support the ‘Aussie’.
New Zealand dollar (NZD) firms on AUD correlation
The New Zealand dollar (NZD) also enjoyed some success last night, thanks to strong commodities and NZD’s positive correlation with AUD.
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