Pound Rallies on BoE Rate Hike Bets, US Dollar Supported by Risk-Off Mood

The Pound rallied sharply this week, as some positive UK data releases bolstered expectations the Bank of England (BoE) might hike interest rates in December. 

At the same time, the appeal of the US Dollar was boosted this week by a prevailing risk-off mood. 

Pound Surges on Renewed BoE Rate Hike Bets 

GBP/EUR – Up one cent on the week’s opening levels 

GBP/USD – Unchanged on the week’s opening levels 

The Pound enjoyed strong support this week, as the currency was underpinned by rising expectations the Bank of England (BoE) will hike interest rates in December.  

This came in response to data showing a larger-than-expected drop in unemployment in September as well as the UK’s consumer price index, which reported inflation surged to a decade high in October. 

Looking ahead, it’s likely that the UK’s PMI releases will act as the primary catalyst of movement in the Pound next week. Will a slowing of activity in the manufacturing and services sectors unravel some of Sterling’s recent gains? 

Euro Weakens on Dovish ECB Commentary 

EUR/GBP – Down one pence on the week’s opening levels 

EUR/USD – Down two cents on the week’s opening levels 

The Euro got off to a poor start this week, with the single currency being undermined by a weak industrial production print from the Eurozone.  

Applying additional pressure to the single currency were some dovish comments from European Central Bank (ECB) officials, particularly from President Christine Lagarde, who suggested a premature tightening of policy would ‘only make this squeeze on household incomes worse’. 

The latest Eurozone PMI figures will no doubt be the focus for EUR investors next week, with their release potentially weighing on the Euro if economic activity in the bloc slowed this month as forecast. 

US Dollar Firms in Risk-Off Trade 

USD/GBP – Unchanged on the week’s opening levels  

USD/EUR – Up one cent on the week’s opening levels  

The US Dollar trended higher this week, as the appeal of the safe-haven currency was bolstered amidst deteriorating market risk-appetite, which was attributed in large part to a collapse of the Turkish Lira.  

This uptick in the ‘Greenback’ was also reinforced by some positive data as the latest US retail sales figures beat forecasts. 

Turning to next week’s session, the publication of the minutes from the Fed’s November policy meeting will a key focus for USD investors, as they look for any signs there might be appetite for hiking interest rates earlier than mid-2022. 

Australian Dollar Dented by Souring Market Sentiment 

AUD/GBP – Down one pence on the week’s opening levels 

AUD/USD – Down once cent on the week’s opening levels 

The Australian Dollar trended broadly lower this week, with the risk-sensitive currency being dented by a prevailing risk-off mood.  

These losses were also compounded by some dovish comments by Reserve Bank of Australia (RBA) Governor Philip Lowe, in which he suggested a rate hike next year is unlikely. 

The publication of Australia’s latest PMI releases will be the main focus for AUD investors next week, with the ‘Australian Dollar poised to strengthen if the reopening of more of the country results in an acceleration of growth in the private sector. 

Key Data  

Nov 22 GBP CBI Industrial Trends Orders (Oct)  

Nov 22 AUD Manufacturing PMI (Nov) 

Nov 22 AUD Services PMI (Nov)  

Nov 23 EUR Manufacturing PMI (Nov) 

Nov 23 EUR Services PMI (Nov) 

Nov 23 GBP Manufacturing PMI (Nov) 

Nov 23 GBP Services PMI (Nov)  

Nov 24 EUR German IFO Business Climate (Nov) 

Nov 24 USD Durable Goods Orders (Oct) 

Nov 24 USD GDP (Q3) 

Nov 24 USD FOMC Minutes 

Nov 26 AUD Retail Sales (Oct)