Markets remain focused on global policy developments this morning, with political and central bank headlines continuing to drive currency movements.
The Japanese Yen has come under pressure after reports that Prime Minister Sanae Takaichi is not in favour of further interest rate hikes at this stage. In addition, the government has nominated two new members to the Bank of Japan’s policy board who are seen as being comfortable with slightly higher inflation in order to support economic growth. This has weighed on the Yen, which is now trading close to a two week low against the U.S. Dollar.
Elsewhere, the Australian Dollar has moved higher after inflation data came in stronger than expected. This has raised the possibility that interest rates in Australia may need to rise further, which has supported demand for the currency.
The U.S. Dollar has been slightly softer overall. Ongoing uncertainty around U.S. trade policy, also contributing to expectations that the Federal Reserve may still have room to lower interest rates later in 2026. This has reduced some of the usual safe haven demand for the Dollar and allowed currencies such as Sterling and the Euro to find support in the short term.
Sterling is also in focus ahead of the Denton and Gorton by-election tomorrow. The Pound is currently poised to end the week higher against both the Dollar and the Euro if Labour manages to hold onto what has historically been one of its safest seats. Markets are less concerned with Starmer personally, but rather with the political uncertainty that could follow a defeat. A heavy loss for the ruling Labour Party could reignite speculation over Labour leadership and raise the risk of a shift toward more left-leaning fiscal policy, something that currency markets tend to view negatively for the Pound.
The Euro continues to face its own challenges. While the European Central Bank is expected to leave interest rates unchanged for now, weaker growth prospects in the region mean there is still discussion around possible rate hikes later in the year.
Looking ahead, Eurozone inflation data is due later today and is expected to come in at around 1.7 percent. If confirmed, this would be below the ECB’s 2 percent target and could strengthen the case for future interest rate hikes.
Away from currencies, investors will also be watching corporate earnings later today, with Nvidia due to report. Forecasts suggest profits could rise by around 62 percent for the quarter ending January, with revenue expected to increase by approximately 68 percent. First quarter revenue guidance is projected at around 72 billion dollars, and with Nvidia having beaten sales forecasts for 13 consecutive quarters, the scale of any upside surprise could influence broader market sentiment.
GBP/EUR 1.1445 GBP/USD 1.3483 GBP/AED 4.9571
GBP/AUD 1.9062 GBP/CHF 1.0451 GBP/CAD 1.8480
GBP/NZD 2.2621 EUR/USD 1.1765 GBP/ZAR 21.4876