GBP does an about-face on USD but dips against Euro
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Daily Forex Market Report 08-Dec-2022: GBP does an about-face on USD but dips against Euro
Despite looking weak in the earlier hours, Cable did an about-face in yesterday’s session and ended the day 0.6% higher at 1.220.
It was unsurprising given the general direction the greenback is headed (down, that is), and indicatively, the US Dollar Index (DXY) opened this morning’s session 0.3% lower at 104.84.
In this morning’s Asia trading window, the GBP/USD pair has inched higher to 1.221, and there is little on the economic calendar to suggest any catalyst for dramatic price action today.
GBP/USD is generally bearish as speculation of dollar top mounts – Source: tradingview.com
USD/CAD, which was on a bit of a rally leading up to the Bank of Canada’s Wednesday interest rate decision, fell back to an intraday day low of 1.358 when the bank opted for a 50 bps hike over the softer 25 bps option.
The pair is changing hands slightly lower at 1.356 in today’s Asia session.
Yesterday’s Eurozone GDP figures came in slightly higher than expected, with third-quarter growth of 0.3% beating out 0.2% forecasts.
The most vigorous growth, of 2.3%, was recorded in Ireland, with Malta and Cyprus expanding at 1.3%, while the steepest declines were in Estonia, Latvia and Slovenia.
In response, EUR/USD closed Wednesday 0.4% higher at 1.051 and has held onto that price point this morning.
While the euro closed lower against the pound, the EUR/GBP pair has so far gained 0.12% in today’s Asia trading session and is currently changing hands at 86.19p.
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Employment data also failed to impress, while the goods trade balance widened its deficit more than expected.
As such, Federal Reserve chair signalled a slower pace of interest rate hikes in the months to come.
"It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” said Powell, though he did note that the terminal rate could be "somewhat higher" than the 4.6% indicated by in the September projections.
EUR/GBP closed the Wednesday session at .863, around 12 basis points below the intraday high, though the euro has the slight upper hand this morning having added a few pips.
Yesterday’s EU headline inflation data came in at a flat 10% against a 10.3% forecast, though that figure is still unacceptable high given the 2% target, so excessive rate hikes are likely to stay on the agenda in the coming months.
Combined with Powell’s dovish overtures, EUR/USD jumped a full percentage point to 1.042 yesterday, and continued to rally another 0.33% to 1.045 in today’s Asia window.
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