Pound Boosted as UK Eases Covid-19 Restrictions, USD Tumbles as Investors Await Fed Meeting

Pound (GBP) Climbs as UK Set to Ease Plan B Restrictions

The Pound (GBP) has risen against its rivals today as the UK’s rate of inflation hit a 30-year high in December.

The sharp increase is thought to have been largely driven by the higher cost of clothes, food, furniture, and eating out. The figures are likely to increase chances of an early interest rate hike by the Bank of England (BoE) ahead of their 3 February meeting.

The Pound has also been pushed higher today following Prime Minister Boris Johnson’s announcement that the country’s ‘Plan B’ restrictions will be lifted next week.

The rest of the week for the Pound could see a drop in the currency with retail sales in December forecast to fall.

Euro (EUR) Drops as German Inflation Soars

The Euro (EUR) has fallen against many of its rivals today as German inflation its highest levels in three decades. Analysts warned that consumers in the trading bloc’s largest economy should prepare for further price increases in the coming months.

The Euro has also struggled against headwinds today as tensions between Russia and Ukraine continue to mount. On Tuesday reports indicated that German officials were considering halting the Nord Stream 2 pipeline from Russia if military action against Ukraine takes place.

Looking to the rest of the week for the Euro, a forecast rise to the Eurozone inflation rate  on Thursday could see EUR fall further. Investors will also be closely watching speeches by ECB board members on Thursday for indications of monetary policy changes in order to combat rising inflation.

US Dollar (USD) Dips ahead of Fed January Meeting

The US Dollar (USD) has dropped against the majority of its competitors today. A risk-on trading environment has seen investors avoid the safe-haven ‘Greenback’, whilst speculation ahead of the US Federal Reserve’s next meeting on 26 January has led to reduced bets on the currency.

Analysts are predicting at least three interest rate hikes by the central bank over the course of 2022 as the Fed attempts to combat soaring inflation. Indications that the Fed may start its process of quantitative tightening sooner than initially expected may also led to reduced trading of USD today.

Looking ahead to the week for USD, a forecast fall in initial jobless claims may help provide a small lift to the currency although movements may be limited ahead of the Fed’s January meeting.

Australian Dollar (AUD) Boosted by Risk-On Mood

The Australian Dollar (AUD) has steadily climbed today amid a risk-on market mood. Recovering iron ore prices have also helped to boost the currency over the course of the day. Continually soaring Covid-19 infection levels may have limited gains for the ‘Aussie’ however.

Thursday’s figures indicating a fall in the country’s unemployment rate could help AUD climb, although an expected fall in employment change figures for December may be seen by investors as evidence of a tightening labour market.

Canadian Dollar (CAD) Tumbles as Inflation Hits Highest Point since 1991

The Canadian Dollar (CAD) has tumbled today despite a risk-on trading environment as the country’s rate of annual inflation hit its highest point since 1991. Higher prices for food, vehicles, and housing were key drivers of the high rate of price growth.

With no significant data for the rest of the week for the ‘Loonie’, the currency is likely to be affected by oil prices.