Pound (GBP) subdued as BoE rate hike bets continue to drop
The pound (GBP) was muted against most of its peers at the end of last week, as expectations for any meaningful tightening from the Bank of England (BoE) continued to fade.
Markets have steadily pared back rate hike bets, with investors no longer pricing in a full 25bps interest rate hike by the end of the year.
Looking ahead, movement in the pound may be limited at the start of this week as GBP investors brace for the release of several high-impact UK economic indicators later in the session.
Euro (EUR) flat as risk appetite improves
The euro (EUR) fell back against its more risk-sensitive peers on Friday as the single currency’s safe-haven status proved a liability amid the market cheer that followed Iran’s announcement reopening the Strait of Hormuz.
EUR demand was then further undermined by a dovish repricing of European Central Bank (ECB) policy expectations, as cooling energy prices and reduced inflation risks prompted markets to scale back bets for an impending hike.
Looking ahead, Germany’s latest producer price index may underpin the euro today, as a sharper-than-expected jump in factory input costs last month looks set to fuel inflation expectations in the Eurozone’s largest economy.
US dollar (USD) slides as safe-haven demand falters
The US dollar (USD) closed last week’s session on a sour note amid a sizable pullback in safe-haven demand through Friday’s session.
Sentiment initially improved on US President Donald Trump’s remarks suggesting a deal with Iran is close, before surging as Iran announced it was fully reopening the Strait of Hormuz.
Renewed US-Iran tensions have already seen the US dollar recover these losses this morning, with Tehran stating it has ‘no plans to participate’ in further talks after the US seized an Iranian cargo ship in the Strait of Hormuz.
Canadian dollar (CAD) retreats as oil prices plunge
The Canadian dollar (CAD) stumbled on Friday as the appeal of the commodity-linked currency was knocked by a 10% slump in oil prices.
The ‘loonie’ is poised to rebound today, underpinned by a fresh rise in oil prices and the expectation that Canada’s latest consumer price index will report a sharp acceleration in inflation last month.
Australian dollar (AUD) slides in risk-off trade
The Australian dollar (AUD) retreated through Monday’s Asian trading session, as the fresh rise in US-Iran tensions sapped risk sentiment.
New Zealand dollar (NZD) pressured by cautious mood
The New Zealand dollar (NZD) was also pressured in overnight trade amid the prevailing risk-off market mood.
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