Daily Forex Market Report 11-Nov-2022: GBP and Euro rise against a weaker USD

Investors weight up risk-on assets at the expense of the dollar index

We might actually be seeing a payoff for the US Federal Reserve’s hardline fiscal tightening game plan.

Inflation fell to 7.7%, a good deal more than the 8% forecast, with core inflation – which excludes food and energy – falling to 6.3% against 6.5% expectations.

It’s still far above the Federal Reserve’s target of 2%, and the markets reacted with a huge relief rally on riskier equities products and a sharp sell off of the US dollar.

The US Dollar Index (DXY) plummeted 2.3% in yesterday’s session, and losses are continuing this morning, with the going rate at three-month lows of 107.31.

Following the softer inflation figures, three Fed speakers put their weight behind a looser economics policy going forward.

Today’s UK gross domestic product data showed a quarterly contraction of -0.2%, which was quite a bit less than the -0.5% expected and as such, yearly GDP grew above forecasts at a rate of 2.4%.

The trade deficit also tightened.

GBP/USD responded extremely well to this mix, surging nearly 3% to two-months highs of US$1.173 yesterday and continuing to rally this morning.

Cable has so far held those September highs and is eyeing up the US$1.19 resistance level.

EUR/USD has already exceeded August highs after soaring to US$1.02 yesterday and continuing to surge to US$1.023 in this morning’s Asia trading hours.

Plenty of resistance has been clocked at the US$1.03 price point.

EUR/GBP lost around 100 pips yesterday but there are signs of clawbacks this morning as traders hunt down riskier equities options. The pair is currently changing hands at 87.19p.

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