Pound (GBP) muted amid BoE policy uncertainty
The pound (GBP) traded sideways yesterday amid uncertainty over Bank of England (BoE) monetary policy.
While some GBP investors are confident the BoE will pause interest rates in the coming months, some analysts caution that global trade tensions and underwhelming UK economic growth could still force the central bank’s hand.
UK economic data remains thin on the ground today, which may leave Sterling to trade without any strong directional bias.
Euro (EUR) flat amid EU-US trade war fears
The euro (EUR) was mostly rangebound on Wednesday as EUR investors expressed concern over transatlantic trade tensions, after the EU vowed to retaliate against US tariffs on steel and aluminium.
While transatlantic trade tensions weighed on EUR sentiment, the single currency was able to avoid any notable losses amid the optimism surrounding Ukraine ceasefire talks.
Coming up, the Eurozone will publish its latest industrial production figures later today. Economists forecast factory output in the bloc rebounded at the start of the year, which could help to underpin the euro today.
US dollar (USD) underpinned by cooling inflation
The US dollar (USD) traded with modest gains yesterday, after the latest US consumer price index reported inflation cooled more than expected last month.
While this would normally weaken USD exchange rates as it stoked Federal Reserve interest rate cut bets, hopes that lower rates may relieve pressure on the US economy helped propel the ‘greenback’ higher.
The US CPI figures will be followed by the latest producer price inflation data today. If February’s PPI figures report a cooling of inflation it may further undermine inflation expectations and may extend the uplift in USD exchange rates.
Canadian dollar (CAD) firms following BoC rate decision
The Canadian dollar (CAD) ticked higher on Wednesday, following the Bank of Canada’s (BoC) latest interest rate decision.
While the BoC cut rates by 25bps, CAD exchange rates firmed as Governor Tiff Macklem said the bank did not consider a larger cut.
Turning to today we may see the commodity-linked ‘loonie’ take its cues from the oil market, with CAD exchange rates potentially strengthening if crude prices continue to recover.
Australian dollar (AUD) weakens in risk-averse trade
The Australian dollar (AUD) retreated in overnight trade as a prevailing risk-off market mood made the currency less attractive to investors.
New Zealand dollar (NZD) slides amid cautious mood
The New Zealand dollar (NZD) also softened overnight on Wednesday as a result of the negative shift in market risk appetite.
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