Pound Sterling

Pound Slumps as Bailey Signals Cautious Approach, US Dollar Bolstered by Hawkish Stance from Powell

Pound (GBP) Falls after Cautious Bailey Speech

The Pound (GBP) tumbled against its competitors today after hawkish comments from Bank of England (BoE) Governor Andrew Bailey.

Bailey signalled a cautious approach in its future policy, stating that the BoE may not need to act as forcefully as first predicted. Additionally, recently appointed BoE policymaker Swati Dhingra stated that a ‘gradual approach’ to rate hikes would be preferable.

Brexit-related headwinds may have also weighed on Sterling today. Tensions between the UK and EU have heightened in recent days after the UK government passed legislation designed to undermine the Northern Ireland Protocol.

The final reading of GDP growth figures on Thursday could pull the Pound lower if investors see it as a sign of the UK’s poor economic outlook.

Euro (EUR) Drops after Lagarde Speech

The Euro (EUR) slipped against its rivals today amid mixed comments from European Central Bank (ECB) President Christine Lagarde.

On the one hand, Lagarde stated that the Eurozone’s economic recovery was ‘very much underway’. On the other, the central bank’s president warned that era of ultra-low inflation was unlikely to return which may have dented confidence in EUR.

A drop to fall to Germany’s rate of inflation today may have also weighed on the Euro. The bloc’s largest member fell against an expected rise largely owing to the German government’s cost of living package. The figures may have seen investors limit bets on more aggressive action from the ECB.

Looking ahead, a drop to German retail sales on Thursday could push the single currency lower if figures print as forecast. Also on Thursday, unemployment in Germany and the Eurozone is predicted to remain high which could also limit rate hike bets. On the other hand, inflation in the Eurozone is forecast to rise on Friday which could push EUR higher.

US Dollar (USD) Climbs as Powell Reiterates Need for Rate Hikes

The US Dollar (USD) gained against many of its competitors today amid hawkish comments from multiple Federal Reserve officials. Fed Chair Jerome Powell signalled that the central bank would act as aggressively as necessary to prevent high inflation from becoming embedded.

Fed policymaker Loretta Mester supported this stance in an interview today, stating that she ‘would be advocating for a 75 bps’ rate hike if economic conditions remained as they are.

A risk-off market mood may have also helped to support gains for USD today. Markets were fearful of the possibility of a recession.

Friday’s predicted increase to the PCE price index, the Fed’s preferred measure of inflation, could push USD higher if investors see it as increasing the chances that the Fed will act at their next meeting.

Australian Dollar (AUD) Trends Lower amid Risk-Off Mood

The Australian Dollar (AUD) slipped against its competitors today amid a risk-off market mood. Fears of a global recession may have acted as headwinds for the ‘Aussie’ today. Significant losses may have been limited by a continued uptick to iron ore prices, however.

A forecast uptick to manufacturing output in June could bolster the AUD on Friday. Additionally, any further gains for iron ore could boost the currency.

Canadian Dollar (CAD) Bolstered by Rising Oil Prices

The Canadian Dollar (CAD) climbed higher today amid a continued rise to crude oil prices. The commodity-tied ‘Loonie’ was bolstered by concerns of reduced supply as well as reports that the G7 would be capping the price of Russian oil.

Looking ahead, a drop to GDP figures on Thursday could dampen confidence in CAD. Further changes to the price of crude oil could also cause movement in the ‘Loonie’.