Pound (GBP) dented by pre-budget speech
The pound (GBP) tumbled against its stronger rivals yesterday, after Chancellor Rachel Reeves used a pre-budget speech to pave the way for coming tax rises.
Tighter fiscal policy could hamper UK economic growth and potentially prompt the Bank of England (BoE) to pursue looser monetary policy, with both these factors weighing on Sterling.
The UK’s final services PMI may have little impact on GBP today, unless it deviates from the preliminary estimate. Therefore budget and BoE speculation could continue to determine the pound’s direction.
Euro (EUR) buoyed amid cautious mood
The euro (EUR) firmed on Tuesday as the safer single currency benefitted from the risk-off mood gripping markets.
However, EUR found its upside limited by a lack of Eurozone data and the currency’s negative correlation with a rising US dollar (USD).
Germany’s latest factory orders data came out this morning to show a 1.1% rebound in orders in September. This could support the single currency during today’s session.
US dollar (USD) hits multi-month highs amid risk aversion
The US dollar was the clear winner during yesterday’s session, with the safe-haven ‘greenback’ striking multi-month highs against many of its rivals thanks to the anxious market mood.
In addition, elevated US government bond yields – which surged following the Federal Reserve’s policy decision last week – also lent USD strength.
Turning to today, the US ADP employment change figure and ISM services PMIs for October are in focus. If jobs growth and service sector activity both remained weak last month, the US dollar could trim its recent gains.
Canadian dollar (CAD) firms in tandem with USD
The crude-linked Canadian dollar (CAD) shrugged off a drop in oil prices yesterday and rose against many of its peers, thanks to CAD’s positive correlation with USD.
Oil price dynamics and USD movement are likely to continue driving CAD exchange rates today. Could a pullback in the US dollar strength undermine the ‘loonie’?
Australian dollar (AUD) fluctuates on mixed data
The Australian dollar (AUD) faced volatility overnight amid mixed Australian data. While the Ai Group industry index beat forecasts, the final services PMI was revised lower.
New Zealand dollar (NZD) choppy amid shifting mood
The New Zealand dollar (NZD) also had a turbulent time overnight, with NZD fluctuating amid an uncertain market mood.
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