Pound Struggles Amid Risk-On Market Mood, Euro Trends Higher as ECB Members Signal 2022 Rate Hike

Pound (GBP) Drops amid Risk-On Trading 

The Pound (GBP) fell against many of its rivals today. Increased bets on riskier currencies limited interest in Sterling. A lack of significant data also left Sterling at the mercy of the markets today. Bets on the Pound may have also been limited ahead of speeches from Bank of England (BoE) policymakers later this week. 

Sterling likely also saw headwinds today from domestic political strife. Prime Minister Boris Johnson is facing renewed calls for his resignation following the issuing of fines over the partygate scandal.  

Friday’s speech from BoE Governor Andrew Bailey could prompt movement in GBP. A hawkish change of tone could boost Sterling. Also on Friday, a forecast fall to UK private sector performance could pull the Pound lower. 

Euro (EUR) Climbs as ECB’s Nagel Signals 2022 Rate Hike 

The Euro (EUR) saw mixed fortunes today. The single currency fell against its riskier competitors amid a risk-on trading mood. EUR climbed against its poorer performing risk-averse rivals however. Hawkish comments from European Central Bank (ECB) board member Joachim Nagel signalling a third quarter rate hike from the central bank likely boosted the currency today. 

A rebound to industrial production in the Eurozone may have also helped the Euro to climb higher today. A stronger output of consumer goods saw output rise 0.7% in February. Additionally, a narrowing of the Eurozone’s trade deficit in February may have also prompted upward movement in EUR. 

Final March inflation figures for the Eurozone could push the single currency higher on Thursday if they increase expectations of an ECB rate hike. Friday’s speech from ECB President Christine Lagarde could see EUR rise if she gives any signals of a 2022 rate hike. 

US Dollar (USD) Suffers From Profit Taking 

The US Dollar (USD) fell against the majority of its competing currencies today amid a risk-on trading environment. USD also suffered from some profit-taking today amid a softer tone surrounding US Treasury bond yields. 

Major losses for the US Dollar today were likely prevented by a continued hawkish stance from the Federal Reserves. Multiple policymakers have stated their desire for a series of aggressive interest rate hikes. Speaking on Monday, board member James Bullard said that he saw interest rates rising to 3.5% by the end of 2022. 

Looking to the week ahead for USD, investors will be most keenly focused on two speeches by Fed Chair Jerome Powell on Thursday could see the currency leap higher. Gains could be limited by a forecast downturn to US private sector output on Friday however. 

Australian Dollar (AUD) Gains as Shanghai Covid Cases Fall 

The Australian Dollar (AUD) made gains against its rivals today. Hawkish minutes from the Reserve Bank of Australia (RBA) continued to provide tailwinds for the Aussie today. As well as this, reports that Covid-19 cases in Shanghai fell today helped improve optimism surrounding AUD trading conditions. 

In the week ahead, Friday’s PMI figures could limit previous highs for the Australian Dollar if they fall as forecast. 

Canadian Dollar (CAD) Boosted as Inflation Hits 31-Year High 

The Canadian Dollar has climbed against its competitors today. A recovery to crude oil prices helped to bolster the commodity-tied ‘Loonie’. Additionally, Canadian inflation leaped to a 31-year high today. This in turn boosted expectations of a rate hike from the Bank of Canada (BoC) and likely pushed CAD higher. 

Looking ahead, a predicted sharp fall to February’s retail sales on Friday could limit gains for CAD. Fluctuating commodity prices may also prompt movement in the ‘Loonie’.