The pound stabilised on Tuesday in the wake of some hawkish comments from a Bank of England (BoE) policymaker.
Sterling is mostly rangebound so far this morning, with GBP/EUR muted at €1.1836 and GBP/USD flat at $1.2080. GBP/CAD is subdued at C$1.5541, while GBP/AUD and GBP/NZD holding steady at AU$1.7331 and NZ$1.9249, respectively.
Looking ahead, will movement in the currency market remain limited today in the absence of any market moving data?
Despite lacking a clear catalyst for the movement, the pound ticked up at the start of this week, trading with modest gains against both the euro and US dollar.
What’s been happening?
However, Sterling later reversed these gains amid ongoing concerns over the Bank of England’s (BoE) bleak economic forecasts and recession warning.
The euro, meanwhile, struck lower on Monday in the wake of the Eurozone Sentix investor confidence after August’s index reported a smaller-than-expected improvement in morale.
The index suggested that ‘the economic situation in the Eurozone remains difficult’ and that a recession in the bloc is ‘very likely’.
At the same time, the US dollar found itself on the back foot yesterday as a prevailing risk-on mood sapped demand for the safe-haven currency.
Further reinforcing the USD selloff was a slump in US Treasury bond yields.
Looking ahead, with UK, US and Eurozone economic releases thin on the ground today, any movement in the currency market may be driven by geopolitical developments.
What’s coming up?
This could see the US dollar influenced by US-China tensions after Beijing announced that it will continue its military drills near Taiwan.
If tensions over the island continue to flare investors may favour the safe-haven currency.
Meanwhile, concerns over European energy security may limit bets on the euro as economists warn a looming gas shortage will undoubtedly tip the Eurozone into a recession.
UK politics are likely to be the focus for GBP investors in the absence of any notable economic releases today.
This could see the pound weaken amid ongoing concerns over the paralysing effect of the Conservative leadership election.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)