EUR/USD 1.16189
-0.121%
Gold 4364.57
-0.840%
Oil 96.389
2.311%
USD/JPY 153.928
0.247%
GBP/USD 1.35190
-0.199%
GBP/JPY 208.097
0.064%
Browse More
  • English
  • 简体中文
  • 繁體中文
  • Tiếng Việt
  • ไทย
  • Indonesia
Subscribe
Real-time News
On September 10th, European Central Bank (ECB) President Christine Lagarde emphasized the uncertainty of the outlook at her post-policy press conference. Following Thursdays hawkish statement, financial markets are now almost evenly divided on whether the ECB will raise interest rates again next month. The ECB raised rates by 25 basis points to 2.5% on Thursday, in line with expectations. However, according to LSEG data, the probability of a rate hike on October 29th is currently 49%; if not, the probability of a hike before December 17th is 89%, and the probability of the deposit rate reaching 3% before Christmas is 36%. ECB staff raised their inflation forecasts for 2027 and 2028, citing inflationary pressures from the Middle East conflict, and also raised their GDP growth forecasts for 2026 and 2027, citing "the eurozone economys resilience exceeding expectations." The ECB stated that the outlook remains highly uncertain, a point Lagarde attempted to convey at her post-policy press conference. She said the uncertainty is so great that the situation could change overnight—for example, with rising diesel prices. "We simply cannot predict what will happen next," Lagarde said.U.S. existing home sales totaled 3.98 million units annualized in August, in line with expectations and down from 4.06 million units in the previous month.US existing home sales fell 2% month-over-month in August, compared with a previous reading of -1.70%.U.S. wholesale sales rose 0.8% month-on-month in July, with the previous figure revised from -3.00% to -2.9%.Gold prices fell more than 1% on Thursday as strong U.S. inflation data and rising oil prices increased market bets on a Federal Reserve rate hike next week. Kyle Rodda, senior financial markets analyst at Capital.com, said the producer price index data tells us that underlying inflation in the U.S. economy is picking up, partly due to rising energy costs. U.S. producer price increases in August were largely in line with expectations, but energy prices rebounded. According to the CME FedWatch Tool, traders now expect a 70% probability of a rate hike next week, up from 62% before the data release. However, most economists surveyed by Reuters expect the Fed to keep rates unchanged at its September 15-16 meeting and for the remainder of the year. A stronger dollar makes dollar-denominated gold more expensive for holders of other currencies, while rising yields on benchmark 10-year U.S. Treasury bonds further pressured gold prices. Rodda added that higher bond yields reflect more persistent and higher inflationary pressures from rising oil prices, which also contributed to the decline in gold prices. Rising bond yields typically increase the opportunity cost of holding non-yielding assets, thus putting downward pressure on gold.

GBP/USD falls to around 1.2370 as the BoE considers taking swift action ahead of UK inflation and US purchasing managers' indices

Alina Haynes

Apr 17, 2023 13:53

 GBP:USD.png

 

On Monday morning, the GBP/USD currency pair retested an intraday low of 1.2390 after extending Sunday's decline from a 10-month high. To provoke adverse after breaking a four-week uptrend, the Cable pair explains the most recent concerns emanating from the United Kingdom (UK) and the optimism surrounding the Federal Reserve (Fed).

 

According to the Financial Times (FT), "The Bank of England is considering a major overhaul of its deposit guarantee scheme, including increasing the amount covered for businesses and compelling banks to pre-fund the system to a greater extent to ensure faster access to cash when a lender collapses."  The revelation fuels banking concerns in the United Kingdom and places pressure on the Cable duo.

 

UK Chancellor Jeremy Hunt's concerns about US subsidies may also be exerting downward pressure on the GBP/USD exchange rate as British firms rush to claim benefits before leaving the country. According to the news, "Chancellor Jeremy Hunt warned Sky News that Britain should be wary of any new subsidies, warning that they could undermine the economy and possibly even spark a protectionist trade war."

 

A larger-than-expected decline in US retail sales was unable to offset positive data from US industrial production and the University of Michigan's (UoM) consumer confidence index from the previous day. Despite this, US retail sales decreased by 1.0% in March compared to the predicted -0.4% decline and February's -0.2% decline. As opposed to the 0.2% market consensus and previous reading, Industrial Production increased by 0.4% in the month in question. The preliminary result of the University of Michigan's (UoM) Consumer Confidence Index for April, which increased to 63.5 from 62.0 analysts' expectations and previous readings, was also encouraging. In addition, inflation forecasts for the next year increased from 3.6% in March to 4.6% in April, while inflation forecasts for the next five years decreased by 2.9% during the same month.

 

Notably, Fed officials have recently appeared more hawkish than their BoE counterparts, which has exerted additional pressure on the GBP/USD exchange rate.

 

In this environment, the S&P 500 Futures exhibit modest gains following Wall Street's pessimistic close, while bond yields remain unchanged following weekly increases.

 

Moving forward, the current week is crucial for GBP/USD speculators as it contains a variety of high-quality inflation, employment, and UK PMI data. These data may be used to support the Bank of England's (BoE) officials' waning hawkish inclination and may keep bears in play. However, the US PMIs and Fed discussions should not be disregarded when looking for clear guidelines.

Suggestion