Daily Currency Update

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Pound kicks higher thanks to Powell comments

GBP - British Pound

The pound has managed to shrug off concerns around the labour market yesterday and continue to eek out gains against both the US dollar and euro. Indeed at one point overnight, when liquidity was thinner, GBP/USD managed to surge 100 points due to several options being triggered before retracing back down to the mid 1.41s. Despite this though it is remarkable how easily the pound has moved through GBP/USD 1.39 up to 1.41+ and GBP/EUR 1.14 to 1.16+. Regarding the labour market it was mixed news yesterday for the UK. Whilst unemployment hit the highest level in 5 years there are signs that more and more people are being added back to the payroll an indication that the labour market is stabilising.

Key Movers

Over in the US the main market news for everyone came from Federal Reserve Chairman Jerome Powell who was testifying in front of the Senate. Powell made it very clear that there will be no interest rate hikes anytime soon despite the worrying pick up in inflation. He re-iterated his stance that he would need to see inflation average above 2% for a long time before acting. All rather dovish from the Chairman of the world's largest central bank and the US Dollar sold off accordingly hence the moves we have seen since yesterday on GBP/USD. Underneath all of this though some investors are convinced that the Fed will act sooner than they have indicated and have begun to wind forward their forecasts for a hike from early 2024 to mid 2023. This still seems a long way off but the dollar can react long before any hikes actually occur and it could strengthen significantly particularly in the face of other central banks if they remain resolute and keep interest rates flat.

Expected Ranges

GBP/USD: 1.4100 - 1.4260 ▲

GBP/EUR: 1.1620 - 1.1700 ▲

GBP/AUD: 1.7820 - 1.7930 ▲

EUR/USD: 1.2145 - 1.2200 ▲