The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
The pound is continuing to slide this morning, with GBP/EUR sinking to €1.1643 and GBP/USD tumbling at $1.3443. GBP/CAD is weakening at C$1.6763, while GBP/AUD and GBP/NZD are ticking lower at AU$1.8223 and NZ$1.8964, respectively.
Will the pound extend its losses today as investors continue reacting to the BoE’s decision?
What’s been happening?The pound plummeted yesterday after the BoE monetary policy committee voted by 7-2 to leave interest rates unchanged at 0.1%.
In the lead up to the meeting, investors had increasingly expected the central bank to hike interest rates based on rising inflationary pressure and comments from BoE policymakers.
But markets were left surprised by the Bank’s decision, triggering a sharp selloff in GBP.
Sterling also came under pressure from the BoE downgrading its UK growth forecasts, and lifting its inflation expectations to hit 5% by next April.
Meanwhile, the US dollar soared on Thursday, rebounding from some Fed-driven losses early in the session to make significant gains across the board.
Amid a more cautious market mood, and as the Federal Reserve’s tightening monetary policy stance appears to further diverge from the European Central Bank (ECB) and BoE, the US dollar rocketed higher.
Due to its negative correlation with the US dollar, the euro was mixed yesterday, with EUR strengthening against more risk-sensitive currencies.
Wider market movement offset data showing improving German factory orders for September and a slowdown in the Eurozone services PMI for October.
What’s coming up?Reaction to the BoE’s interest rate decision and comments from the Bank’s policymakers look set to continue driving movement in the pound today.
After markets were surprised by the interest rate decision, some investors feel the confusion created by the central bank’s communications prior to the announcement risks undermining its credibility, potentially creating GBP volatility from comments today.
The main data release today is October’s US non farm payrolls, with forecasts pointing to a strong number of jobs added to the US economy last month.
After Fed chair Jerome Powell said the US central bank is looking for signs of recovery in the US labour market before raising rates, an upbeat figure today could boost USD.
Meanwhile, Eurozone retail sales data this morning could provide modest support for the euro.
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)