Pound lower as markets await US CPI data
Thursday 10 November, 2022
Daily Currency UpdateIt’s been a topsy-turvy week for the pound with GBP/USD fluctuating between 1.13 and 1.16 with little domestic data of note dictating its moves. Earlier in the week, we had unconfirmed reports that the UK and EU were close to solving their differences over checks on goods entering Northern Ireland which saw the pound push higher. We have also had unconfirmed reports from China over a possible change in its zero-Covid policy, which seems to not be the case as one of its largest cities Guangzhou implements a series of ever-growing lockdowns across districts within it as cases rise. These rumours benefitted the pound. However, the lack of substance to them has pushed it back lower as the market focus is redirected to the upcoming potential recession that the UK could face over the coming months, driven by ongoing spending pressures faced by consumers as the Bank of England is forced to raise interest rates due to soaring inflation. Later today we have UK Monetary Policy Committee members Dave Ramsden and Silvano Tenreyro talking so comments on future policy moves by the Bank of England and commentary on the UK's economic health will be monitored. Tomorrow we will see this week’s big data release from the UK, the first estimate of third-quarter growth which is expected to show the economy contracted by -0.5% between July and September. GBP/USD is at 1.1385 and GBP/EUR is at 1.14.
Key MoversThe results of the midterm elections in the US are still not clear however it is looking like the Republicans are likely set to win the lower chamber, The House of Representatives but by a slimmer margin than what was forecasted. The outcome for control of the upper chamber, The Senate is also unclear and it could be that the current 50/50 split is maintained which would give Democrats control as the Vice President, Kamala Harris has the casting vote should there be a tie in legislation being passed. It’s unlikely we will know the full results until early December however the uncertainty has done little to dent the US dollars appeal. Today’s big event will be the latest inflation figures from the US due at lunchtime. CPI is expected to have fallen from 8.2% to 7.9% which would be its fourth consecutive drop however the core number which strips out fuel and food costs is the one the markets will be more focused on. This is expected to slip to 6.5% from 6.6%. Should it hold or rise then we may expect the US dollar to gain as it will force the US Federal Reserve to consider whether more aggressive interest rate hikes are needed. Should it fall further than expected then we can expect a potential dollar sell-off. EUR/USD is back under parity, trading at 0.9980.
- GBP/USD: 1.1260 - 1.1500 ▼
- GBP/EUR: 1.1310 - 1.1520 ▼
- GBP/AUD: 1.7600 - 1.7825 ▲
- EUR/USD: 0.9980 - 1.0100 ▼