Pound (GBP) strengthens as calm returns to the UK bond market
The pound (GBP) proved to be one of Monday’s strongest performers, with the currency reversing most of its losses from Friday’s session as UK bond yields fell back from their recent highs.
The upside in Sterling was also supported by Bank of England (BoE) interest rate speculation, with markets still betting on three hikes this year, despite the apparent easing of tensions in the Middle East.
GBP investors will be focused on the publication of the UK’s latest services PMI today. March’s preliminary figures will be the first look at how the war in the Middle East is impacting the UK economy, and a resilient print could provide another boost for the pound.
Euro (EUR) knocked by decline in consumer morale
The euro (EUR) was largely subdued yesterday, with its safe-haven appeal dampened by hopes for peace in the Middle East.
EUR demand was also undermined by the Eurozone’s latest consumer confidence index, which reported morale in the bloc slumped to its worst levels since October 2023.
Looking ahead, the Eurozone’s latest PMIs could put pressure on the euro today, as analysts forecast private-sector growth will have slowed to a crawl amid rising energy costs and geopolitical uncertainty.
US dollar (USD) retreats as Trump hails ‘very good’ talks with Iran
Trade in the US dollar (USD) was volatile at the start of this week. USD demand initially surged in response to an ultimatum from President Donald Trump threatening to ‘obliterate’ Iranian energy infrastructure unless Iran reopened the Strait of Hormuz.
However, Trump later hailed ‘very good and productive’ conversations with Iran aimed at ending the conflict, with the apparent de-escalation cheering markets at the expense of the safe-haven currency.
Expect USD exchange rates to remain highly sensitive to developments in the Middle East through today’s session, with Iran’s claims that ‘no negotiations’ have been held with the US potentially triggering fresh volatility.
Canadian dollar (CAD) retreats as oil prices plummet
The Canadian dollar (CAD) slumped on Monday, with the sharp downturn in oil prices following Trump’s comments weighing heavily on the commodity-linked currency.
The ‘loonie’ looks poised to extend this weakness today if crude prices continue to push back towards $100 a barrel.
Australian dollar (AUD) slides on abysmal PMI data
The Australian dollar (AUD) retreated overnight on Monday, with AUD investors being alarmed by Australia’s latest PMI data as the country’s private sector reported its first contraction in 18 months.
New Zealand dollar (NZD) muted amid global uncertainty
The New Zealand dollar (NZD) was subdued in overnight trade, with Iran’s denial that it held talks with the US reigniting concerns over the Middle East.
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