Pound (GBP) plummets amid fiscal fears
The pound (GBP) fell off a cliff yesterday as UK government bond yields hit a 27-year high ahead of Chancellor Rachel Reeves’s upcoming autumn budget.
The rise in borrowing costs comes amid concerns about the UK’s difficult fiscal position, while also piling further pressure on Reeves as she looks for a way to fill a hole in the public finances.
Today brings a speech from Bank of England (BoE) policymaker Catherine Mann as well as the UK’s final services PMI. Hawkish comments and confirmation of a strong acceleration in service sector activity could help GBP regain ground.
Euro (EUR) trades in a wide range
The euro (EUR) was mixed yesterday, with EUR firming against weaker rivals thanks to a gloomy market mood and an uptick in Eurozone inflation.
However, the common currency’s strong negative correlation with the US dollar (USD) meant the euro fell against its stronger peers.
European Central Bank (ECB) President Christine Lagarde is due to speak today. If she signals that interest rates may be at neutral levels, EUR could strengthen.
US dollar (USD) recovers amid risk-off mood
The US dollar rallied yesterday, with an anxious market mood turbocharging demand for the safe-haven currency.
A sixth consecutive month of contracting activity in the US manufacturing sector, as reported by the latest ISM PMI, capped USD in the afternoon. However, the ‘greenback’ still retained most of its gains.
Looking ahead, USD could face pressure later today if we see a decline in job openings and another contraction in factory orders.
Canadian dollar (CAD) rises alongside USD
The Canadian dollar (CAD) strengthened in tandem with the US dollar yesterday, thanks to CAD’s positive correlation with USD.
Canadian economic data remains in short supply today, likely leaving the crude-linked ‘loonie’ to trade on oil price dynamics and USD movement.
Australian dollar (AUD) wobbles despite strong GDP
The Australian dollar (AUD) wavered overnight, initially rising after GDP beat forecasts to show a stronger acceleration of growth in the second quarter, before a risk-off mood dragged AUD back down.
New Zealand dollar (NZD) weakens amid risk aversion
The New Zealand dollar (NZD) softened in overnight trade as a downbeat market mood dampened demand for the risky ‘kiwi’.
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