US dollar slumps after downgrade to US credit rating

Pound (GBP) underpinned by UK-EU deal

The pound (GBP) trended broadly higher through yesterday’s session, following the announcement of a new deal between the UK and the EU to lift checks on food, livestock and agricultural products.

The announcement was well received by GBP investors amid hopes it could boost the UK economy by £9bn and help lower UK food prices.

GBP investors will look to a speech by Bank of England (BoE) Chief Economist Huw Pill for fresh impetus today. As one of the more hawkish members of the BoE’s Monetary Policy Committee (MPC) his comments may help to underpin the pound.

Euro (EUR) bolstered by USD weakness

The euro (EUR) rallied on Monday as it was underpinned by its negative correlation with the US dollar (USD).

However, the single currency’s upside potential was ultimately capped after the European Commission slashed its 2025 Eurozone growth forecast in light of increased fragmentation in global trade.

Germany’s latest producer price index may drag on the euro today, following a sharper-than-expected fall in producer inflation last month.

US dollar (USD) slides as US stripped of triple-A credit rating

The US dollar tumbled at the start of this week after Moody’s downgraded its US credit rating from Aaa to Aa1, citing concerns over the growing US national deficit and rising interest costs.

The announcement spooked markets, with a subsequent selloff of US bonds triggering a further rise in US Treasury yields and raising fresh concerns over the cost of US government borrowing.

The hangover from the credit rating downgrade may continue to weigh on the US dollar today, unless we hear something positive regarding trade talks with a US trading partner.

Canadian dollar (CAD) slides as oil prices soften

The Canadian dollar (CAD) weakened on Monday, with the currency coming under pressure amid a softening of oil prices and as a result of its positive correlation with the US dollar.

Canada will publish its latest consumer price index later today. Inflation is forecast to have fallen rapidly in April, which could drag on the ‘loonie’ if CAD investors see this as placing more pressure on the Bank of Canada (BoC) to continue cutting interest rates.

Australian dollar (AUD) slumps on dovish RBA rate cut

The Australian dollar (AUD) stumbled overnight on Monday, following the Reserve Bank of Australia’s (RBA) latest interest rate decision. In addition to cutting rates by 25 basis points, the RBA also cut its growth forecasts and signalled more policy easing is likely.

New Zealand dollar (NZD) tracks AUD lower

The New Zealand dollar (NZD) also weakened in overnight trade, with the ‘kiwi’ falling in sympathy with its antipodean cousin.

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