USD gains across the board

Key Movers

The euro broke below 1.16 against the dollar on Wednesday after being the biggest loser the previous day. Rising breakeven inflation rates, concerns surrounding a looming energy crisis and a widening in real German-US yield spread have all come together to dampen demand for the single unit. With the gap in monetary policy expected to widen and real near-term challenges threatening the broader economic recovery, we expect further downward pressure on the EUR through the end of the year. EURUSD was down 0.48%, trading at 1.1537 at the time of writing.

The UK's inflation rate hit 3.2% in August, significantly higher than the Bank of England's target of 2%. The question remains whether this rise is a short term phenomenon as a result of post COVID-19 and Brexit supply chain issues, or a longer term concern. As such, the market remains unsure about the Bank of England's next move, with some investors suggesting the Bank of England may even increase rates as early as November. GBPUSD trended lower on Wednesday morning, trading around 1.3556 at the time of writing. This suggests the market remains highly uncertain about the Bank of England's next move.