Pound (GBP) strengthens despite bond market turbulence
The pound (GBP) firmed against most of its peers at the end of last week, despite another uptick in UK borrowing costs
Friday’s rise in 10-year gilt yields effectively wiped out the fall seen following the US-Iran ceasefire announcement and raises fresh concerns about how the UK government may fund potential energy support later in the year.
While UK economic data is in short supply at the start of this week, Sterling may draw support from the government’s plans to adopt EU single market rules, to better align its economy with its closest trading partner.
Euro (EUR) buoyed by Ukraine-Russia ceasefire
The euro (EUR) trended broadly higher through Friday’s trading session, supported in part by its negative correlation with the US Dollar (USD).
This upside was also supported by a short ceasefire agreed between Ukraine and Russia to mark Orthodox Easter, the first pause in fighting since the start of the war in 2022.
Turning to the start of this week, the Hungarian election result may provide a boost for the euro amid hopes that Peter Magyar’s victory could limit Hungary’s obstruction in Brussels.
US dollar (USD) stumbles as core inflation misses expectations
The US dollar ticked lower at the end of last week, with the latest US consumer price index reporting a sharp rise in headline inflation, but that core inflation undershot expectations.
If the Federal Reserve views the jump in headline inflation as a temporary, energy-driven shock, then the softer core reading may not justify a shift toward tighter monetary policy.
The US dollar has already recouped these losses this morning, however, after sentiment shifted sharply over the weekend as peace talks broke down and geopolitical tensions escalated once again.
Canadian dollar (CAD) flat on uneven jobs report
The Canadian dollar (CAD) was rangebound on Friday, as Canada’s latest labour data reported a smaller-than-expected rise in employment, but that unemployment remained unchanged, defying forecasts that it would rise in March.
Looking ahead, the ‘loonie’ may strengthen today as US President Trump’s threat to blockade Iranian shipping through the Strait of Hormuz triggered a fresh rally in oil prices.
Australian dollar (AUD) slides in risk-off trade
The Australian dollar (AUD) retreated through Monday’s Asian trading session, as the breakdown in US-Iran peace talks sapped market risk appetite.
New Zealand dollar (NZD) undermined by Middle East uncertainty
The New Zealand dollar (NZD) also softened in overnight trade as the renewed tensions in the Middle East triggered risk-off flows.
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