Pound (GBP) finds support as markets reassess BoE bets
The pound (GBP) traded in a wide range yesterday, although it managed to push higher against some of its rivals as investors reined in bets on a Bank of England (BoE) interest rate cut.
With oil and gas prices soaring, market odds for a BoE rate cut in March dropped from 80% last week to just 29% this week.
The UK’s final services PMI for February may lend Sterling support today, if it confirms robust British service-sector activity last month.
Euro (EUR) struggles despite hotter inflation figures
The euro (EUR) fell against its stronger peers yesterday as EUR suffered from its strong negative correlation with the surging US dollar (USD).
Hotter-than-forecast Eurozone inflation figures failed to provide the common currency with a meaningful upside, although the euro was able to find success against risk-sensitive rivals.
Turning to today, the Eurozone’s January unemployment rate is expected to show that joblessness held at a record low. This could underpin EUR later in the session.
US dollar (USD) continues to climb amid escalating conflict
The US dollar extended its rally yesterday, with the dollar index hitting a six-week high, as widespread risk aversion saw investors seek shelter in the safe-haven ‘greenback’.
Amid the escalating conflict in the Middle East, including fresh US strikes on Iran and an Israeli ground offensive in Lebanon, anxiety rippled out through global markets.
This afternoon, the US ISM services PMI for February is due to be published, with a positive reading potentially buoying the ‘greenback’. Ongoing risk aversion could also underpin the US dollar.
Canadian dollar (CAD) hits multi-week highs as oil prices soar
The crude-linked Canadian dollar (CAD) surged to multi-week highs yesterday as oil prices continued to march higher amid the conflict in the Middle East.
Canada’s services PMI could undermine the ‘loonie’ later today, if it reports a continued contraction in the sector. However, strong oil prices may offset the downside.
Australian dollar (AUD) subdued despite strong GDP
The Australian dollar (AUD) fluctuated overnight, with the ‘Aussie’ struggling to capitalise on stronger-than-forecast GDP figures amid a risk-off market mood.
New Zealand dollar (NZD) wobbles amid gloomy sentiment
The New Zealand dollar (NZD) wavered overnight, although the risk-sensitive ‘kiwi’ managed to avoid losses despite a cautious tone in markets.
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