Pound (GBP) rebounds despite political jitters
The pound (GBP) was initially muted yesterday amid fresh speculation that Prime Minister Keir Starmer could face a leadership challenge in the first half of 2026.
Sterling managed to rebound against its weaker rivals in the second part of the session, as an uptick in UK bond yields helped bolster GBP demand.
Bank of England (BoE) Governor Andrew Bailey is due to deliver a speech today. If he strikes a dovish tone, GBP may weaken.
Euro (EUR) undermined by USD correlation
The euro (EUR) enjoyed some support at the start of yesterday’s session, thanks to an unexpected surge in German industrial production in October.
However, EUR pulled back against stronger rivals in the afternoon due to EUR’s negative correlation with a rising US dollar (USD).
Germany’s latest trade figures may impact EUR exchange rates today. Signs of sluggish trade activity could weigh on the single currency.
US dollar (USD) rises amid pre-Fed repositioning
The US dollar rose yesterday as markets scaled back their more dovish bets on the Federal Reserve’s monetary policy outlook.
USD exchange rates rose in tandem with US Treasury yields, as investors repositioned ahead of the Fed decision later this week.
The session ahead brings a last-minute flurry of US jobs data before the US central bank announces interest rates. Further signs of a slowing labour market could see USD slide.
Canadian dollar (CAD) bolstered by uptick in USD
The crude-linked Canadian dollar (CAD) was mixed yesterday, although CAD managed to firm against weaker rivals despite falling oil prices thanks to its positive correlation with USD.
Oil price dynamics could drive CAD today, although movement may be limited ahead of the Bank of Canada (BoC) policy decision tomorrow.
Australian dollar (AUD) boosted by hawkish RBA decision
The Australian dollar (AUD) rallied overnight as the Reserve Bank of Australia (RBA) held interest rates and signalled that the next move could still be a hike, despite last week’s disappointing GDP figures.
New Zealand dollar (NZD) climbs on AUD correlation
The New Zealand dollar (NZD) also rose overnight, with the ‘kiwi’ being supported by its positive correlation with the ‘Aussie’.
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