Pound recovers as stock markets push higher
Wednesday 4 January, 2023
Daily Currency UpdateGBP/USD which was looking like it could break below 1.19 yesterday has staged a recovery as global stock markets push higher on the back of falling inflation in Germany and France and reports that the Peoples Bank of China are looking to step in to help property developers who have been pushed close to bankruptcy on the back of a slowing economy exacerbated by the countries now abandoned zero-Covid policy. Domestically it has been a quiet start to the week with little top tier data due until Jan 18th's inflation figures. The potential fragility of the UK's housing sector which has gained more and more column inches in the press of late means that Friday morning Halifax House Price Index may get more attention than would usually be expected and could cause some GBP volatility. The monthly reading is predicted to drop for the fourth month in a row. GBP/USD is currently at 1.2065 and GBP/EUR at 1.1365.
Key MoversIt appears that Eurozone inflation may have peaked with both Germany and France's monthly reading's falling short of expectations in the past 24 hours. Yesterday saw Germany's came in 8.6% y/y a fall from 10% with France's latest data being released this morning seeing it recede to 6.7% from 7.1% y/y. The bloc's overall reading is due Friday morning and if it does show a drop from 10.1% to 9.6% as predicted then this would be the third monthly fall and would indicate we are on a definite downward trajectory. The fall in inflation has been assisted by a warmer than expected winter meaning wholesale gas prices have fallen dramatically. The euro has pushed higher this morning on the back of the news as it means there is expected to be less of a consumer spending squeeze however the European Central Bank will still be required to raise interest rates for a few more meetings to control inflation that is still way above its 2% target, albeit at potentially a slower pace. Top tier data kicks off in earnest today with this afternoon's US ISM Manufacturing PMI followed by this evenings release of the minutes from the last Federal Open Market Committee interest rate decision. EUR/USD is up to 1.0615.
- GBP/USD: 1.1970 - 1.2120 ▲
- GBP/EUR: 1.1280 - 1.1400 ▲
- GBP/AUD: 1.7460 - 1.7660 ▼
- EUR/USD: 1.0540 - 1.0680 ▲