Pound (GBP) mixed amid IMF commentary
The pound (GBP) saw mixed movement on Tuesday as markets digested the IMF’s latest health-check of the UK economy.
Although the IMF nudged up its growth forecast for 2025 from 1.1% to 1.2%, it also warned of headwinds and urged Chancellor Rachel Reeves to ease her fiscal rules to avoid the need for emergency spending cuts.
UK economic data is in short supply today, potentially leaving the pound to trade without a clear direction.
Euro (EUR) stifled by USD recovery
The euro (EUR) was also mixed during yesterday’s session, as the currency came under pressure due to its negative correlation with the rising US dollar (USD).
This strength in USD offset a larger-than-expected improvement in Eurozone economic sentiment and relief that the US was delaying tariffs on the EU, therefore keeping the euro from climbing against some peers.
German unemployment and Eurozone consumer inflation expectations could impact EUR today. Could an uptick in the latter underpin EUR?
US dollar (USD) rises as Trump delays EU tariffs
The US dollar strengthened yesterday as USD investors welcomed Donald Trump’s delaying of tariffs on the EU and a risk-off mood supported the safe-haven ‘greenback’.
As the session progressed, an improvement in the market mood capped USD’s gains. In addition, a sharp slump in US durable goods orders put a lid on the US dollar.
Turning to today, the US dollar could be muted as markets await the Federal Reserve’s latest meeting minutes, which are due out this evening.
Canadian dollar (CAD) uncertain on USD and oil correlations
The Canadian dollar (CAD) was pulled in different directions yesterday due to its positive correlations with a stronger US dollar and weaker oil prices. This led to mixed movement in the ‘loonie’.
With Canadian data absent from today’s economic calendar, oil price dynamics may drive CAD exchange rates. If prices remain muted, CAD could find itself trapped in a narrow range.
Australian dollar (AUD) unable to hold post-inflation gains
The Australian dollar (AUD) briefly rose overnight as Australia’s monthly CPI indicator exceeded expectations. However, a gloomy market mood saw AUD quickly shed its gains.
New Zealand dollar (NZD) rallies as RBNZ rates in ‘neutral zone’
The New Zealand dollar (NZD) leapt overnight in the wake of the Reserve Bank of New Zealand’s (RBNZ) policy decision. Although the bank cut rates, as expected, Governor Christian Hawkesby said rates are now ‘in the neutral zone’ and they are ‘not pre-programmed on moves now’.
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