The US dollar traded in a wide range yesterday, initially stumbling amid Omicron fears, before rallying sharply after Federal Reserve Chair Jerome Powell’s tapering comments.
Trade in Sterling is mixed so far this morning, with GBP/EUR flat at €1.1821 and GBP/USD climbing to $1.3772. GBP/CAD is muted at C$1.6976, while GBP/AUD and GBP/NZD tumble, falling to AU$1.8430 and NZ$1.9265 respectively.
In the spotlight today, will a scheduled speech by BoE governor Andrew Bailey drive more volatility in GBP exchange rates?
What’s been happening?The pound initially jumped at the start of this week, with the currency rallying through Monday’s Asian trading session, in response to some hawkish comments made by the BoE’s Andrew Bailey over the weekend.
Bailey was reported to say that the BoE ‘will have to act’ to curb inflation, which prompted some GBP investors to start to price in the potential for the bank to begin hiking interest rates in November.
However Sterling fell back from its best levels during European trading hours as analysts expressed doubts over some investors’ more optimistic timelines for rate hikes.
Meanwhile, the US dollar firmed on Monday amidst a weakening of market risk appetite, after China reported a smaller-than-expected expansion of GDP in the third quarter.
However these gains were tempered somewhat by the publication of the latest US industrial production figures, after they reported a shock contraction of factory output last month.
At the same time, a correction in the euro helped the currency to recapture some of its recent losses and close yesterday’s session up against most of its peers.
What’s coming up?Looking ahead, a scheduled speech by Andrew Bailey will likely be in the spotlight today, as GBP investors look for more clarity on whether the BoE could hike interest rates this year.
This could send the pound higher again if Bailey clearly signals that a 2021 hike is a possibility.
Across the pond, we may see USD investors focused on a series of speeches by Federal Reserve policymakers as they look for more insight into the Fed’s upcoming tapering announcement.
Finally, in the absence of any major EUR data releases, the euro could struggle to find any strong directional bias today, particularly amid ongoing concerns over the policy divergence between the European Central Bank (ECB) and other major central banks.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)