Pound (GBP) firms following UK inflation figures
The pound (GBP) ticked higher yesterday after the UK consumer price index for August showed headline inflation holding at 3.8%, as forecast.
With inflation almost double the Bank of England’s (BoE) 2% target, the CPI reinforced bets that the BoE will leave interest rates unchanged today and potentially signal that another cut is unlikely in 2025.
Sterling could strengthen again later today if the BoE does strike a hawkish tone following its policy decision.
Euro (EUR) wobbles amid profit-taking
The euro (EUR) initially weakened yesterday, with the single currency suffering some profit-taking after Tuesday’s impressive gains.
A slight downward revision to the Eurozone’s final inflation reading for August also pressured EUR, although a decline in the US dollar (USD) in the afternoon helped EUR recoup losses.
Eurozone data is in short supply today, potentially leaving EUR to be driven by USD movement, particularly in the wake of the Federal Reserve’s interest rate decision last night.
US dollar (USD) rebounds following Fed decision
After softening ahead of the Federal Reserve’s policy announcement yesterday, the US dollar was then able to rally in the wake of the decision.
Newly appointed rate-setter Stephen Miran was the only dissenting voice voting for a 50bps cut, while Fed Chair Jerome Powell warned of upside risks to inflation.
Looking ahead, the latest US jobless claims figures could impact USD later in the session. Any signs of continued weakness could dent the American dollar.
Canadian dollar (CAD) slides as BoC cuts rates
The Canadian dollar (CAD) fell yesterday as the Bank of Canada (BoC) cut interest rates by 25bps, although CAD later regained ground following the Fed decision, thanks to its positive correlation with USD.
CAD could find itself back on the defensive today following the BoC decision, while oil price movements may also affect the crude-linked currency.
Australian dollar (AUD) slumps following gloomy jobs data
The Australian dollar (AUD) plunged overnight as a souring market mood and a downbeat jobs report both weighed on the ‘Aussie’.
New Zealand dollar (NZD) plummets amid deep contraction in GDP
The New Zealand dollar (NZD) also suffered heavy losses overnight, as new data showed the New Zealand economy contracted 0.9% in the second quarter – far worse than the forecast downturn of 0.3%.
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