Pound (GBP) Gains as UK Inflation Hits 40-Year High
The Pound (GBP) edged higher against its rivals today after UK inflation hit its highest rate in 40 years. The figures likely increased bets on Sterling amid expectations of further action from the Bank of England (BoE). Soaring prices of food and beverages fuelled the rise, as well as increasingly high prices for petrol and energy.
Brexit-related headwinds may have capped any gains for GBP today. The UK government came under further criticism today regarding the Northern Ireland Protocol. Officials from US President Joe Biden’s administration stated that the UK’s planned moves were ‘not conducive’ to a trade deal.
A predicted fall to UK private sector growth on Thursday could pull Sterling lower if figures print as forecast. Additionally, a drop to May’s retail sales on Friday could also cap gains for GBP.
Euro (EUR) Climbs amid ECB Rate Hike Bets
The Euro (EUR) made gains against its competitors today. A risk-off trading sentiment helped to bolster the safe-have single currency. A sell-off of the US Dollar (USD) following Federal Reserve Chair Jerome Powell’s testimony this afternoon may have also helped to boost EUR today.
Comments from multiple European Central Bank (ECB) officials could have prompted movement in the single currency. On the one hand, the Euro continued to be underpinned by hawkish reaffirmations of the ECB’s rate hike schedule. On the other, uncertainty surrounding the ECB’s plans to tackle fragmentation may have limited bets on the single currency.
A drop to German and Eurozone private sector growth could see the Euro slip if figures print as forecast on Thursday.
US Dollar (USD) Slips after Powell Testimony
The US Dollar (USD) lost ground at the end of today after comments by Federal Reserve Chair Jerome Powell. Whilst Powell signalled that the Fed was ‘strongly committed’ to bringing down inflation, he remained vague on the exact pace of future rate hikes.
Additionally Powell’s testimony may have increased fears of an economic slowdown after he stated that rate hikes could prompt a recession. A dovish perspective from Fed official Patrick Harker may have also weighed on USD. Harker signalled today that he was ‘between 50 and 75’ in regards to rate hikes.
Looking ahead for USD, a downturn to private sector growth could hurt the US Dollar’s chances if figures print as forecast on Thursday. Additional testimony from Powell could also prompt movement in the currency as well as any further changes to risk appetite.
Australian Dollar (AUD) Drops amid Risk-Off Trading
The Australian Dollar (AUD) fell against its rivals. A retreat to risk-appetite likely pulled the ‘Aussie’ amid fears of an economic slowdown. Fresh Covid-19 cases in China enhanced market fears that the world’s second-largest economy could suffer. On the other hand, an uptick to iron ore prices may have helped underpin AUD today.
Looking ahead, a forecast downturn to private sector growth could pull the ‘Aussie’ lower on Thursday. A speech from Reserve Bank of Australia (RBA) Governor Philip Lowe on Friday could help limit losses for AUD, however.
Canadian Dollar (CAD) Stumbles as Oil Prices Slump
The Canadian Dollar (CAD) tumbled lower today amid a slump in oil prices. The commodity-tied ‘Loonie’ was pulled lower after US President Joe Biden announced a suspension of the federal tax on gasoline. CAD may have been underpinned by an above-forecast rise to inflation, prompting further bets on a 0.75% rate hike from the Bank of Canada (BoC).
With no further significant data for the currency this week, volatility in the price of crude oil could continue to prompt movement in the ‘Loonie’.