Pound (GBP) pressured by jump in UK borrowing costs
The pound (GBP) faced notable selling pressure at the end of last week’s session amid turmoil in the UK bond market.
10-year bond yields surged on Friday, striking their highest levels since 2008 amid UK inflation risks and expectations for up to three interest rate hikes from the Bank of England (BoE) this year.
Movement in the pound may be limited today, as GBP investors brace for a series of high-impact UK economic releases later in the week.
Euro (EUR) buoyed by ECB rate hike speculation
The euro (EUR) rallied against most of its peers on Friday, following a Bloomberg report suggesting the European Central Bank (ECB) may consider a rate hike in April if inflation rises too sharply in March.
However, the single currency’s gains were ultimately capped by its strong negative correlation with the US dollar (USD).
Coming up, the release of the Eurozone’s latest consumer confidence index is likely to put pressure on the euro today, as the war in the Middle East is expected to spark a fresh decline in morale.
US dollar (USD) firms amid fresh escalation of Middle East tensions
The US dollar strengthened at the end of last week amid renewed safe-haven demand, following reports that the US is preparing to send more troops to the Middle East.
The deployment of thousands of additional Marines to the region appeared to lend credence to reports that the Trump administration is considering plans to occupy Iran’s Kharg Island to cut off oil revenue for Tehran.
Expect USD exchange rates to remain sensitive to developments in the Middle East at the start of this week, with US President Donald Trump’s latest threats already boosting the US dollar’s safe-haven appeal.
Canadian dollar (CAD) underpinned by upbeat retail sales data
The Canadian dollar (CAD) edged higher on Friday, supported by a surprisingly strong domestic retail sales print in February.
Looking ahead, the ‘loonie’ may get off to a volatile start this week as a lull in domestic data will likely leave movement in the commodity-linked currency tied to oil price dynamics.
Australian dollar (AUD) tumbles amid Iran concerns
The Australian dollar (AUD) got off to an appalling start this week, with the fresh escalation of tensions in the Middle East weighing on market risk appetite through Monday’s Asian trading session.
New Zealand dollar (NZD) retreats in risk-off trade
The New Zealand dollar (NZD) also weakened overnight as investors shunned risk-sensitive assets amid the threat of further escalation in the conflict with Iran.
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