Pound (GBP) pressured by BoE rate cut warning
The pound (GBP) softened at the end of last week amid predictions the Bank of England (BoE) may surprise markets with an interest rate cut this week.
Analysts at both Barclays and Goldman Sachs argue that investors may be underestimating the chances of a cut, with both institutions suggesting that the BoE’s decision this week is likely to be far more finely balanced than current market sentiment implies.
Expect the pound to open this week on the defensive if the market begins adjusting to such a scenario.
Euro (EUR) dips as inflation cools
The euro (EUR) ticked lower on Friday as Eurozone inflation cooled from 2.2% to 2.1% in October.
While only a modest deceleration, it was enough to trigger a dovish repricing of European Central Bank (ECB) rate expectations among some EUR investors.
The only Eurozone data of note at the start of this week is October’s finalised manufacturing PMI. But barring any significant revision to factory sector growth, movement in the euro is likely to be primarily driven by wider market trends.
US dollar (USD) buoyed by Fed repricing
The US dollar (USD) continued to firm at the end of last week, as the currency was able to maintain the bullish momentum it had enjoyed since the Federal Reserve’s interest rate decision on Wednesday.
Investors continued to trim their bets on a December rate cut following some hawkish remarks from Fed Chair Jerome Powell.
The latest ISM manufacturing PMI will be in focus for USD investors at the start of this week. If the recent uptick in the index persists and the US factory sector returned to growth in October, it's likely to lift the US dollar.
Canadian dollar (CAD) flat on mixed GDP print
The Canadian dollar (CAD) wavered on Friday amid mixed domestic GDP figures. While September’s preliminary figures reported an unexpected expansion, growth in August was revised down from 0% to -0.3%.
A speech by Bank of Canada (BoC) Governor Tiff Macklem could offer fresh direction to the ‘loonie’ at the start of this week. If he maintains the hawkish tone struck by the BoC in the wake of last week’s interest rate decision, the Canadian dollar may appreciate.
Australian dollar (AUD) firms in risk-on trade
The Australian dollar (AUD) ticked higher at the start of this week as a positive market mood boosted the risk-sensitive currency’s appeal.
New Zealand dollar (NZD) wobbles despite upbeat market mood
The New Zealand dollar (NZD) was unable to capitalise on the increase in risk appetite at the start of this week, with the ‘kiwi’ wavering in a narrow range.
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