Daily Currency Update

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USD weaker after FOMC minutes

GBP - British Pound

GBP/USD has drifted higher over the past 24 hours pushing back up towards the 1.37 level, last seen at the end of September. As mentioned earlier in the week the pound is benefitting from the prospect of higher interest rates, however some extra upward pressure has been added over the past 24 hours due to US dollar weakness.

On the domestic front yesterday the main news was that the EU has offered to slash the amount of checks and paperwork required for goods arriving in Northern Ireland from Great Britain. This situation has been bubbling away in the background for some time now, with the UK not happy about how the bureaucracy was impacting the economy. The two sides will now discuss the proposals over the coming weeks. It’s another quiet day on the data front from the UK so expect COVID-19 news and external events again to be the potential main drivers in the pound’s value. GBP/USD trades at around 1.3695 and GBP/EUR at around 1.18

Key Movers

Yesterday was dominated by US inflation and monetary policy developments with the US dollar showing some weakness this morning as a result. Firstly US CPI came in a touch higher than expected with the annual level of inflation now back up to 5.4% when a hold at 5.3% was eyed. On a month by month basis CPI rose 0.4% for September, with the core reading (which strips out fuel and food prices) ticking up by 0.2%. The marginally higher reading wasn't enough to support USD and after some small initial gains it slowly lost value across the board. It appears the level of inflation in America is plateauing with many expecting that it will start to fall back as we head into 2022.

The minutes from the last Federal Open Market Committee meeting were published yesterday evening with it now looking like we could see the current $120b a month of bond purchases from the US Federal Reserve start to be tapered from November or December. The financial support which was implemented to prop up the economy after it was impacted by COVID-19 looks likely to be withdrawn at $15b a month, so from summer 2022 the extra liquidity could have been fully removed.

This pace of tapering was broadly in line with most estimates so this together with no sharp rise in inflation meant that EUR/USD, which had been around the 1.1550 handle this time yesterday, is now just above 1.16. Most stock markets are in positive territory as we start the day and eyes will likely now shift to this afternoon's next batch of data from the States. At lunchtime we have Producer Price Index figures as well as unemployment claims scheduled for release.

Expected Ranges

GBP/USD: 1.36 - 1.3745 ▲

GBP/EUR: 1.1735 - 1.1845 ▲

GBP/AUD: 1.84 - 1.8560 ▼

GBP/NZD: 1.9440 - 1.96 ▼

GBP/CAD: 1.69 - 1.7020 ▲