USD edges higher as traders rush to safe haven

Key Movers

The Euro area is now observing second-round effects from higher energy costs, meaning that it will be harder to bring down consumer prices, according to European Central Bank Governing Council member Klaas Knot, he stated “It is likely that price pressures in these areas will prove more difficult to bring down”.

To summarise it’s a mixture of energy prices, inflation and predictions of a rate cut in 2024 which is causing Euro weakness. The European Central Bank still has plenty of work to do as inflation levels in the Eurozone remain high at 6.1% year on year.

The lack of GBP appreciation on the back of the high inflation prints in the UK signalled that the pounds reaction may be shifting given the growth implications. GBP has outperformed all other majors in 2023 because of better-than-expected economic data and the Bank of England's commitment to higher interest rates. UK housing metrics are continuing to deteriorate, which comes against high and sticky inflation.

With major macroeconomic news at a bit of a premium this week, the most interesting moves we’re seeing in currencies can largely be found among emerging markets. News over the weekend that Saudi Arabia had pledged output cuts to its oil production has kept oil prices relatively well bid so far this week.