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Are the aggressive rate cycles reaching their peak?

Thursday 20 October, 2022

Daily Currency Update

As inflation starts to cool into next year after the Federal Reserve in 2022 raised rates in an aggressive cycle to curb inflation pressures, St Louis Fed President James Bullard says he expects the Federal Reserve to end its front-loading of aggressive interest rate hikes and shift to keep policy in check into next year with small adjustments as inflation settles back. Policy makers are starting to think about a reasonable interest rate level to settle at to keep the economy in balance. Market participants continue to cut into risk. Equity future did have a correction overnight but as trading is well on it way today the Dow and the S&P 500 have both trended higher by 0.60% on the day so far. Gold and Oil are holding steady for recent gains to 1642.00 and 86.00 dollar per barrel respectively. USDJPY trades at 150 yen per dollar and raise further speculation that the BOJ will need to intervene to steam the losses in the yen.

Key Movers

Overnight the Great British pound seems to be attempting to set a bottom at £1.1185 after its reversal from £1.1445 highs earlier this week. The USDGBP pair dropped for the second consecutive day on Wednesday, weighed by negative inflation data and political uncertainty in the UK as the turmoil in the UK government, with the ruling Tory party plotting to replace the recently elected Prime Minister Liz Truss after her tax cut fiasco is adding negative pressure on the pair. Overnight British Prime Minister Liz Truss has been engulfed in yet more chaos, losing a second minister in a week with the resignation of Home Secretary Suella Braverman. The resignation letter also contained a scathing review of Truss’s leadership and indicated deep fissures in the heart of her government. Official figures released on Wednesday showed UK inflation rose to 10.1 per cent in September, returning to a 40-year high first hit in July, as the soaring cost of food squeezed household budgets.  

Expected Ranges

  • EUR/USD: 0.9837 - 0.9754 ▲
  • GBP/USD: 1.1307 - 1.1170 ▲
  • AUD/USD: 0.6334 - 0.6228 ▲
  • USD/CAD: 1.3806 - 1.3686 ▼