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Sterling ends week on back foot after inflation data disappointed

Daily Currency Update

UK inflation data came in lower than expected earlier in this week, which has put Sterling under pressure as it goes into the weekend. The notion that Sterling is not the currency it once was is also rearing its head, with Brexit and underlying economic indicators in the UK suggesting the economy is the slowest growing in the G7. Coupled with general low productivity and less output in the UK, means the pound is certainly not the darling currency it once was. Thoughts now turn to whether the current ranges on GBPEUR and GBPUSD could become the new norm, for 2023 anyway.

Key Movers

It's been a quiet week in the Eurozone overall, with EURUSD being affected primarily by strong US data. We have witnessed the Euro continue to fall against the Dollar due to a lack of boosting EUR data to support the currency. The ECB released the Economic Bulletin, highlighting updates on the economic, financial and monetary developments in the Euro Area. The document showed that the Governing Council saw weakening global economic activity at the turn of the year, following robust growth in the third quarter of 2022. It also noted that “future policy rate decisions will continue to be data-dependent and follow a meeting-by-meeting approach.”

Prices paid to US producers for goods & services rose above expectations in January, which is a warning sign to the Fed that a recent slowdown in inflation has begun to stall. In the aftermath of the report, USD rose to the highs of the day. It continued to rise after the text of Cleveland Fed President Loretta Mester's speech was released, where she said that the Fed will need to go above 5% and stay there for a while. All the US data released this week was much stronger than markets were expecting, causing investors to reassess their bets on the Fed cutting rates toward the end of the year.


Expected Ranges

  • GBP/USD: 1.1945 - 1.2010 ▼
  • GBP/EUR: 1.1210 - 1.1295 ▼
  • GBP/AUD: 1.7410 - 1.7715 ▲
  • EUR/USD: 1.0625 - 1.0685 ▼