• European rate odds boost euro
• UK rate odds weigh on pound

Euro slid in European trade against a basket of major rivals, giving up three-month highs against the pound on active profit-taking. 

Markets still expect the pair to head higher, as the Bank of England is likely to cut interest rates next month, while the ECB is likely to refrain from such a decision.

The Price 

The EUR/GBP pair fell 0.3% to 0.8582, with a session-high at 0.8615. 

The pair rose 0.5% yesterday, the fourth profit in a row, marking three-month highs at 0.8620. 

The gains came as markets rush to cover their big sell positions on the pair. 

European Rates

As European prices accelerated unexpectedly in July, the odds of an ECB interest rate cut in September dived to below 50% as investors await more growth and inflation data from the eurozone. 

UK Rates

Conversely, the Bank of England decided to cut interest rates by 25 basis points at the August meeting, with analysts now expecting more easing measures by the central bank, including another rate cut in September. 

Rate Gap

The current UK-Europe interest rate gap stands at 75 basis points in favor of the UK and will likely shrink to 50 basis points in September, which would provide further support for the euro. 

• Kiwi marks highest level in two weeks
• Odds of RBNZ rate cut next week fade 

The New Zealand dollar rallied in Asian trade against major rivals, extending its gains against the US dollar for another session and hitting two-week highs, following strong New Zealand employment data for the second quarter.

The data shows the continuous tight conditions in the New Zealand labor sector, which will likely force policymakers to maintain high interest rates for an extended duration. 

Price

The NZD/USD rose 1.05% today to 0.6015, the highest since July 22, with a session-low at 0.5948. 

The kiwi rose 0.25% on Tuesday against the US dollar away from nine-month lows at 58.50 cents. 

The kiwi was boosted by a surge in most global stocks, while risk appetite improved amid the unwinding of the carry trade deals. 

Best Performing Currency 

The New Zealand dollar was the best performing G8 currency today, with a 1.05% surge against the US dollar, and a  1.1% rise against the euro, and a 0.8% against the pound to a four-week high at 2.1112. 

It rose over 1.8% against the franc, and 1.4% against the yen, and 1% against its Canadian counterpart. 

Strong Labor Data

Earlier official data showed the employment index rose by 0.4% in the second quarter of the year, beating estimates of 0.2%. 

Unemployment rose to 4.6% in the second quarter, still below expectations of 4.7%.

New Zealand Rates

Last month, the Reserve Bank of New Zealand maintained interest rates unchanged at 5.5% for the eighth meeting in a row but opened the door for easing policies if inflation slowed down.

The RBNZ expects inflation to return to the 1-3% official target in the second half of the year, compared to 3.3% in the second quarter.

The recent labor data hurt the odds of a 0.25% rate cut by the RBNZ at the August meeting. 

The Australian dollar rose against most major rivals today following an expected interest rate decision. 

The Reserve Bank of Australia voted to hold interest rates unchanged at 4.35%, matching analysts’ expectations and affirming the RBA’s commitment to restrictive policies to control inflation.

On trading, AUD/USD rose 0.4% as of 21:52 GMT to 0.652.

Loonie

The Canadian dollar rose 0.3% against its US counterpart to 0.7256.

The US Dollar

The dollar index rose 0.3% as of 21:44 GMT to 102.9, with a session-high at 103.2, and a low at 102.7. 

The selloff came after recent US data showed the economy added only 114 thousand new jobs last month, down from 179 thousand in June, and below estimates of 185 thousand, while unemployment rose from 4.1% to 4.3%. 

Concerns about a US recession spiked after the data, with some investors saying that the Fed might have held off too long before easing policies. 

US stock indices rose on Tuesday as most assets try to recoup from the heavy losses sustained yesterday. 

The selloff came after recent US data showed the economy added only 114 thousand new jobs last month, down from 179 thousand in June, and below estimates of 185 thousand, while unemployment rose from 4.1% to 4.3%. 

Concerns about a US recession spiked after the data, with some investors saying that the Fed might have held off too long before easing policies. 

On trading, Dow Jones rose 1.1% today, or 413 points as of 15:57 GMT to 39,116, while S&P 500 rose 1.6%, or 81 points to 5267, as NASDAQ climbed 1.6%, or 266 points to 16,466.