Home Daily Commentaries US debt continues to hold headlines

US debt continues to hold headlines

Daily Currency Update

The UK monetary policy report hearing offered some sound bites of note, as each of the members testified on inflation and the economic outlook before Parliament's Treasury Committee yesterday. The key takeaway was that quantitative tightening will be gradual and predictable, with next year’s plan being £80 bln as a greater amount could disturb market liquidity. The news did little to stop the falling Pound against the USD yesterday, as markets home in on the US debt ceiling deadline. GBP/EUR also fell under 1.1500 at the time of the meeting. US unemployment claims beat expectations, falling 22k from the previous release and came on under forecast. It is US debt ceiling updates that continue to dominate the headlines and give direction to the USD. US congressional Republican McCarthy presented a confident face that an agreement to lift the U.S. debt ceiling, thus preventing the country from defaulting on its obligations, could be achieved in the near future. GBP/USD has been as low as 1.2390 in the past 24 hours but sits just above 1.2400 for this morning. EUR/USD touched 1.0760 at the lows but has tested 1.0800 in the past few hours.

We end the week with a quieter macroeconomic day. Federal Reserve Chair Jerome Powell is due to participate in a panel discussion in Washington DC later today and European Central Bank President Christine Lagarde is due to deliver a pre-recorded video speech in Sao Paulo. Comments could be scrutinized by market participants for any indicators of future central bank moves.

Key Movers

The European Central Bank raised interest rates earlier this month and after comments from ECB Vice President Luis de Guindos, more hikes look likely in the future after he stated that he was particularly concerned about the accelerating inflation in service industries. These comments came before this morning’s German producer prices, which rose 0.3% in April and is an annual rise of 4.1%, more than twice the ECB’s targeted inflation level. The GBP and the USD have gained ground against the Euro over May, with GBP/EUR going from under 1.1350 to above 1.1500 and EUR/USD falling from above 1.1000 to under 1.0800.

Expected Ranges

  • GBP/USD: 1.2360 - 1.2450 ▼
  • GBP/EUR: 1.1470 - 1.1530 ▲
  • GBP/AUD: 1.8550 - 1.8770 ▼
  • EUR/USD: 1.0730 - 1.0820 ▼