Home Daily Commentaries GBPUSD declines after US Federal Reserve Chair’s comments

GBPUSD declines after US Federal Reserve Chair’s comments

Daily Currency Update

GBP - British Pound

GBPUSD dropped in yesterday afternoon's trading session. US Federal Reserve Chairman, Jerome Powell, unexpectedly announced that the Fed no longer considered inflation transitory, meaning the Fed could accelerate its path to raising interest rates.

Some analysts now expect the pace of tapering to be $25billion a month and not the $15billion a month previously thought. If so, this would mean the end of tapering in April, allowing up to three rate hikes next year, which could strengthen the US dollar.

Key Movers

The euro rose yesterday after inflation data revealed that the cost of living in the region jumped to 4.9%, the highest level on record. This was up from 4.1% in October and ahead of the 4.5% forecast. France suffered a 3.4% inflation increase, its highest in a decade, but it was in Germany, which is among Europe’s largest economies, where prices rocketed, taking the inflation rate to 6%.

The data puts pressure on the European Central Bank to tighten monetary policy, even though recently policy makers have been reassuring that the spike in prices is transitory.

Expected Ranges

  • GBP/USD: 1.3305 - 1.3355 ▲
  • GBP/EUR: 1.1745 - 1.1785 ▲
  • EUR/USD: 1.1315 - 1.1365 ▲