Pound Weighed Upon by Poor UK Outlook, US Dollar Jumps as Powell Promises Aggressive Rate Hikes

Pound (GBP) Slides as Bailey Warns of Slowdown

The Pound (GBP) tumbled against the majority of its competitors today. The Bank of England’s (BoE) dovish outlook continued to weigh on the currency. Additionally, a speech from BoE Governor Andrew Bailey today added to this sentiment. Bailey stated that there were signs of slowing demand from both consumers and businesses.

A poor reception to Chancellor Rishi Sunak’s testimony in front of the Commons Treasury committee also likely weighed on Sterling today. Sunak attempted to justify his poorly received Spring budget amid accusations that his measures could put 1.3 million people into absolute poverty.

Looking ahead for the Pound, the currency could see any major losses limited should GDP growth for the fourth quarter remain unchanged on Thursday.

Euro (EUR) Boosted amid Renewed Peace Talks Hopes

The Euro (EUR) climbed against most of its peers today. Cautious optimism surrounding the Russia-Ukraine conflict helped to buoy the appeal of the single currency. A further round of peace talks is set to be hosted in Istanbul on Tuesday. The talks come as Ukraine’s President Volodymyr Zelenskiy stated that he was willing to bring the prospects of ‘security guarantees and neutrality’ to the negotiating table.

Prospects for a diplomatic solution are not certain however. Ukrainian defence ministry spokesperson Oleksander Motuzyanyk stated today that Russian forces are continuing to attempt to surround Kyiv. Motuzyanyk stated that ‘we don’t see the movement of enemy forces away from Kyiv’.

Looking ahead for the Euro, an expected rise to German and Eurozone inflation this week could push the single currency higher on Wednesday and Friday respectively.

US Dollar (USD) Leaps as Fed Signals Aggressive Rate Hikes

The US Dollar (USD) soared against its competitors today. A cautious trading mood saw investors flock to the safe-haven ‘Greenback’ amid the Russia-Ukraine conflict and rising Chinese Covid-19 cases. Additionally, US Treasury bond yields hit a three-year high today which helped to underpin USD.

The US Dollar found additional support amid increased expectations of a 0.5% interest rate hike from the Federal Reserve. Speaking on Monday, Fed Chair Jerome Powell stated that there was ‘nothing’ preventing the central bank from pursuing a more aggressive strategy. Analysts have increased speculation that the Fed will act in order to curb inflation.

For USD, employment figures on Friday are expected to fall. Previous readings have seen figures surpass forecasts however, and a robust reading could push the US Dollar higher.

Australian Dollar (AUD) Losses Capped by Jump in Iron Ore Prices

The Australian Dollar (AUD) struggled against safer currencies amid risk-off mood. The ‘Aussie’ made gains elsewhere however as iron ore prices soared today. Prices of the commodity have jumped by around 4% as steel production facilities in China struggle to meet orders owing to high Covid case number.

Looking to the week ahead for AUD, a forecast fall to February’s retail sales could pull the currency down on Tuesday. Any further gains for iron ore prices are likely to push the ‘Aussie’ higher, however.

Canadian Dollar (CAD) Suppressed as Oil Prices Slip

The Canadian Dollar (CAD) saw mixed fortunes today. The commodity-tied ‘Loonie’ rose against some of its competitors, but struggled to make gains against its safer rivals amid a drop in crude oil prices. The price of crude per barrel fell over fears of weaker Chinese demand owing to soaring Covid-19 cases.

Looking ahead, a forecast uptick to Canadian GDP on Thursday could help CAD edge higher. Further volatility in the price of crude oil could also prompt additional movement in CAD.