US dollar rallies following hawkish Fed decision

Pound (GBP) mixed ahead of BoE interest rate decision

The pound (GBP) traded without a clear direction on Wednesday, as investors showed caution ahead of today’s Bank of England (BoE) interest rate decision.

The UK’s latest consumer price index failed to provide any real impetus. While core inflation cooled more than expected, headline inflation remained stubbornly above the BoE’s 2% target, muddying the policy outlook.

Attention now turns to the BoE announcement. A rate hold accompanied by dovish guidance could weigh on GBP, while an unexpected rate cut might trigger a sharp drop.

Euro (EUR) supported by weaker US dollar

The euro (EUR) was mixed in midweek trade but found some support from a broadly softer US dollar (USD), to which it often displays a negative correlation.

However, the upside for the single currency was limited after finalised Eurozone CPI figures confirmed inflation slipped below the European Central Bank’s (ECB) 2% target last month.

Looking ahead, ECB President Christine Lagarde is due to speak today. If she reinforces the bank’s recent hawkish rhetoric, the euro could firm.

US dollar (USD) rebounds after Fed rate projections

The US dollar dipped yesterday amid concerns about escalating geopolitical tensions in the Middle East and potential direct US involvement.

However, the ‘greenback’ recovered ground following the Federal Reserve’s latest policy decision. The Fed raised its interest rate forecasts, and Chair Jerome Powell said tariffs could push prices higher this summer.

Today, USD could be driven by shifts in market risk appetite. If tensions persist, demand for the safe-haven US dollar may increase.

Canadian dollar (CAD) pressured by falling oil prices

The oil-sensitive Canadian dollar (CAD) weakened on Wednesday as declining crude prices dragged on the commodity-linked currency.

Looking ahead, an expected improvement in Canada’s business barometer could lend some support. However, CAD may remain primarily reactive to oil market trends and USD movement.

Australian dollar (AUD) slides after jobs data miss

The Australian dollar (AUD) fell sharply overnight following an unexpected drop in domestic employment and a broadly risk-averse mood in global markets.

New Zealand dollar (NZD) tumbles despite strong GDP

The New Zealand dollar (NZD) also slumped as risk sentiment soured. Even stronger-than-forecast Q1 GDP growth failed to buoy the ‘kiwi’ amid the prevailing market caution.

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