The Pound wavered this week, as a shift towards bullish trade cushioned Sterling after the Bank of England (BoE) left interest rates unchanged.
Meanwhile, the US Dollar weakened as weaker US jobs data was taken as confirmation that the Federal Reserve has ended its tightening cycle.
Pound Undermined as BoE Keeps Rates Unchanged
GBP/EUR – Unchanged from the week’s opening levels
GBP/USD – Up one cent on the week’s opening levels
The Pound began the week quietly, due to a lack of data releases. This kept the focus on the incoming interest rate decision from the BoE.
The BoE elected to keep interest rates unchanged, which prompted Sterling to waver lower against its peers. While the bank provided moderately hawkish forward guidance, investors were unconvinced, which kept GBP restricted towards the end of the week.
Turning to next week, the UK’s GDP growth rate is in focus. Could a downturn in the UK economy see GBP slump?
Euro Stumbles as Inflation Cools
EUR/GBP – Unchanged on the week’s opening levels
EUR/USD – Up a cent on the week’s opening levels
Following reports that the German economy was faring better than expected, the Euro initially rose before declining as Eurozone inflation cooled substantially.
While this led to pared back European Central Bank (ECB) rate hike bets, weakness in the US Dollar allowed EUR to strengthen towards the end of the week.
This week, the Eurozone’s retail sales data is in focus. Markets expect a fall of 0.2% on a monthly basis, which could dent EUR by adding to economic fears.
US Dollar Slides as Labour Market Loosens
USD/GBP – Down over a penny on the week’s opening levels
USD/EUR – Down over a cent on the week’s opening levels
A raft of downbeat jobs market data kept the US Dollar in flux during this week’s session. Additionally, the Federal Reserve kept rates unchanged on Wednesday, and employed more cautious language.
A weaker non-farm payrolls print then fuelled speculation that the Fed is done raising interest rates, with the ‘Greenback’ plunging at the end of the week.
The Michigan consumer sentiment index is due to print on Friday. If the index ticks up as economists expect, USD could rise amid improving consumer optimism.
Australian Dollar Climbs as Market Mood Cheers
AUD/GBP – Up half a penny on the week’s opening levels
AUD/USD – Up two cents on the week’s opening levels
The Australian Dollar got off to a poor start this week, as downbeat Chinese economic data weighed on the currency.
However, the risk-sensitive ‘Aussie’ was able to rally as the week progressed, with a strong risk-on impulse in markets seeing AUD surge higher.
The Reserve Bank of Australia (RBA) is expected to hike interest rates by 25bps on Tuesday. This could see the ‘Aussie’ surge to new highs.
Nov 7 AUD RBA Interest Rate Decision
Nov 8 EUR Retail Sales (Sep)
Nov 9 USD Initial Jobless Claims (4/Nov)
Nov 10 GBP GDP Growth Rate (Q3)
Nov 10 USD Michigan Consumer Sentiment (Nov)