EUR/USD higher as pressure grows on China to ease zero-Covid policy
Monday 28 November, 2022
Daily Currency UpdateGBP/USD has slipped a little at the beginning of the week mirroring a downward move in global stock markets as unrest in China over its zero-Covid policy grows. After a strong rally prompted by this month’s US inflation number coming in weaker than expected GBP/USD finally broke through the 1.20 handle after last week’s US PMI data missed the target indicating that the US could be heading for a recession in 2023. It was a quiet end to the week from the UK with little data of note and this week’s calendar is also looking sparse with a speech tomorrow by Bank of England Governor Andrew Bailey the only notable event to keep an eye on. Bailey is due to give a speech before the Lord’s Economic Affairs Committee at 3 pm. As usual, any clues on future policy moves by the Bank will be looked for by investors. GBP/USD trades around 1.21 with GBP/EUR just under 1.16.
Key MoversThe euro is pushing higher this morning as pressure builds on China’s President Xi Jinping to relax the country’s zero-Covid policy which has seen tens of millions of Chinese citizens subject to mass testing and lockdowns in an effort to shut the virus out of the world second-largest economy. Given China’s strong trading ties with Europe, in particular Germany, the growing rumors that the Chinese hierarchy may begin to ease restrictions have lifted the single currency however at present the official line from the government is that it is sticking to its strategy. There have been mass protests in China with some calling for the President to resign which has rattled stock markets around the world. Should the government finally buckle and loosen restrictions it would give stock markets a huge boost and also help dampen inflation as the shortage of goods leaving China caused by the policy has been a contributor to the high inflationary environment we find ourselves in. It would also likely lead to a further rise in EUR/USD however as mentioned before President Xi seems to be sticking to his guns for the time being. Away from China, it’s a quiet start to the week however Wednesday sees the latest inflation data from the eurozone with CPI expected to show a slight fall from 10.6% to 10.4%. Later that day we have the second reading of third-quarter GDP from the States as well as a speech from the head of the US Federal Reserve Jay Powell. Friday sees this week’s main event with the latest US jobs data due. The Non-Farm Payrolls report is expected to show around 200k jobs were added in November. EUR/USD is up to 1.0440.
- GBP/USD: 1.2040 - 1.2155 ▲
- GBP/EUR: 1.1555 - 1.1670 ▼
- GBP/AUD: 1.7910 - 1.8080 ▲
- EUR/USD: 1.0340 - 1.0500 ▲