It has been a choppy 48 hours for major currencies, partly as a result of jittery global risk appetite. US equities remain volatile, with the S&P500 having failed to record more than two consecutive days of gains or losses since 16th May. US 10-year yields fell below 2.2% yesterday - a multi-year low - before staging a modest recovery, in a sign that markets remain concerned about the medium-term outlook for US economic growth and inflation. This tetchy backdrop has seen the Dollar trade-weighted index hover in a narrow 0.5% range in the past 13 sessions. Against a Dollar treading water Sterling has continued to weaken, with the GBP/USD cross temporarily dropping below 1.26 this afternoon to its weakest level since 3 January. There have been no major UK macro data releases to justify this latest drop in Sterling with markets squarely focussed on the unfolding Brexit drama and the lingering risk that a new prime minister will also fail to get the Withdrawal Agreement through parliament. The Kiwi Dollar has suffered a similar downturn in the past two sessions, with NZD/USD temporarily falling below 0.65 for the first time since early October. The Kiwi Dollar weakened yesterday following RBNZ Governor Orr's speech in which he remained open-minded about a proposed increase in domestic banks' capital requirements. Such an increase would likely shrink banks' ability to extend loans to corporates and individuals at a time when domestic growth remains tepid. The Kiwi Dollar temporarily recovered in the run-up to and in the immediate aftermath of the annual budget which the Treasury announced today around 03.00 (London time), before resuming its slide. The budget was focussed on Wellbeing, with $3bn in spending allocated to mental health services and child poverty reduction.
