Sterling outperforms

CAD

The Canadian dollar saw limited movement yesterday, consolidating within a narrow range against the greenback. Oil prices provided some underlying support, but the absence of significant domestic data meant that CAD largely tracked broader dollar dynamics, including some defensive strength due to the US shutdown and global risk aversion.

USD

Yesterday, the dollar traded defensively amidst ongoing concerns surrounding the US government shutdown. With no official economic data being released, market attention was squarely on political developments and the potential for prolonged fiscal uncertainty. Compounding this, recent headlines surrounding a lack of progress in trade talks with China added another layer of risk aversion, weighing on the dollar as investors consider the broader implications. We anticipate this dynamic to persist today, with any news regarding either a shutdown resolution or a breakthrough in trade discussions providing primary drivers.

EUR

The euro found some relative strength against the dollar yesterday, benefiting from the prevailing risk-off sentiment driven by the US government shutdown and lingering US-China trade tensions. While domestic data releases were quiet, the single currency gained as investors sought alternatives to the dollar amid US fiscal and geopolitical uncertainty. Looking ahead, today’s industrial production data for the Eurozone will be key. We anticipate a modest rebound, in line with our recent data reactive piece highlighting improving sentiment. Any upside surprise could lend further support to the euro, reinforcing its appeal as a relative safe haven in the current environment, while a weak print would be a dampener.

GBP

Sterling was a notable outperformer yesterday, shrugging off weaker domestic inflation figures as positive market sentiment provided a much-needed boost. This illustrates the market’s current focus on relative growth prospects and monetary policy divergence. Having digested the employment report earlier in the week, which likely showed a relatively tight labour market, today’s focus shifts to broader sentiment and any speeches from Bank of England officials. We expect the pound to remain sensitive to UK economic fundamentals and global risk appetite. Our prior reports have consistently highlighted the pound’s sensitivity to both economic data and broader market dynamics.

This content was originally published by our partners at Monex Canada.