The USD continues to slide ahead of US jobs report
Friday 2 December, 2022
Daily Currency UpdateThe GBP/USD briefly touched 1.23 yesterday, its highest level since June as this week’s dollar sell-off, which started on Wednesday, continued. There was no UK data yesterday to push the pound higher, instead, some market participants are starting to believe that the USD bull run has come to an end as US inflation data starts to show a continued downtrend. It’s another quiet day from the UK with little data of note until the 14th of December when we see the latest CPI numbers which will likely influence the Bank of England's interest rate decision the day after. With the UK's Office of Budget Responsibility believing the UK is already in a recession it will be interesting to see how aggressive the Bank is with its next rate hike. A hike is needed to tackle persistently high inflation however they may opt for a more conservative 25bp/50bp move rather than another 75bp hike seen at its last meeting. GBP/USD currently is just below 1.23 with GBP/EUR remaining rangebound at 1.1660.
Key MoversEvidence continues to show that US inflation is on a downward trajectory with yesterday’s Personal Consumption Expenditure data falling short of expectations. Year on year it slipped from 6.3% to 6% with the core reading (which strips out volatile food and fuel prices) dipping to 5% from 5.2%. This combined with months of falls in CPI seems to confirm that the Federal Reserve has begun to bring inflation under control however we will likely see a few more interest rate hikes from the Fed to ensure it doesn't flare back up. Yesterday we also had the closely watched ISM Manufacturing PMI from the States which came in at 49.0 below the 49.7 predicted and well below the 50 level that indicates contraction in the sector. Today’s big event is the US jobs report with the Non-Farm Payrolls number expected to show 200k people were added to the workforce in November. As usual anything significantly higher or lower should see the dollar strengthen or weaken. EUR/USD has managed to get to 1.0545 earlier this morning its highest level since June, it’s a little lower at present circa 1.0530.
- GBP/USD: 1.2230 - 1.2400 ▲
- GBP/EUR: 1.1580 - 1.1700 ▲
- GBP/AUD: 1.7900 - 1.8100 ▲
- EUR/USD: 1.0410 - 1.0605 ▲