Pound Sterling

Pound Dips as NI Protocol Drives Brexit Tensions, Euro Struggles as Growth Forecasts Cut

Pound (GBP) Ticks Lower as NI Protocol Tensions Continue

The Pound (GBP) edged lower today as the UK’s poor economic outlook continued to worsen. Reports that diesel prices in the UK have hit a new record high heightened fears over the impact of the country’s cost-of-living crisis.

Brexit-related headwinds also kept trade in Sterling muted today. Boris Johnson visited Northern Ireland amid ongoing reports that the UK is set to legislate its way out of the agreement. Sinn Fein said that it was ‘extraordinary’ that the British government was considering the move.

Looking to the week ahead, March’s unemployment rate is expected to remain unchanged on Tuesday. Any surprise results could impact GBP.

US Dollar (USD) Muted as Market Mood Improves

The US Dollar (USD) was subdued yesterday as the global market mood recovered, thereby dampening the appeal of the safe-haven currency.

However, ongoing expectations of future policy tightening by the Federal Reserve underpinned the US Dollar. Speaking today, Fed policymaker John Williams said that inflation was the central bank’s ‘number one issue’, and that it made sense for the Fed to consider 0.5% rate hikes at upcoming meetings.

Turning to tomorrow, April’s retail sales data could push the US Dollar higher as economists expect strong growth. A speech from Fed Chair Jerome Powell could also prompt movement in USD should he give any further indicators of the central bank’s forward policy.

Euro (EUR) Subdued as EC Slashes Growth Forecasts

The Euro (EUR) was muted against many of its competitors today. Concerning rhetoric from Russia regarding Finland’s and Sweden’s bids for NATO membership likely weighed on EUR over the day.

A cut to EU growth forecasts for 2022 from 4% to 2.7% may have also limited the Euro’s upward movement today. Hawkish comments from European Central Bank (ECB) policymaker Francois Villeroy may have helped prop up EUR, however, preventing losses.

A forecast downturn in Eurozone GDP figures could push the Euro lower on Tuesday, although a speech from ECB President Lagarde could support the single currency should she give any hawkish signals. Wednesday’s Eurozone inflation figures could further increase expectations of an ECB rate hike should they remain high as forecast, potentially bolstering the Euro.

Australian Dollar (AUD) Trends Sideways amid China Slowdown

The Australian Dollar (AUD) traded sideways overall today after some big movement. A sharp slowdown in China’s economic growth in April weighed on the ‘Aussie’ overnight. AUD may have been buoyed by an uptick in iron ore prices, however, as well as reports from Shanghai that lockdown restrictions are set to end in June.

Looking ahead, minutes from the Reserve Bank of Australia’s (RBA) last meeting could prompt movement in the ‘Aussie’ on Tuesday. If the RBA strikes a hawkish tone, AUD could climb.

Canadian Dollar (CAD) Recovers as Oil Prices Rise

The Canadian Dollar (CAD) rallied today, regaining its losses after China’s poor data releases. Following evidence of an economic slowdown in China, investors were concerned that oil demand could dip. However, WTI crude recovered as the day went on, fuelling a rebound in the commodity-linked ‘Loonie’.

Canadian inflation figures for April are forecast to remain high on Wednesday. This could bolster CAD should high inflation prompt rate hike bets.