After hearing from 3 members of the Federal Reserve give their view on how they prefer the US central bank should go forward and how its performing, suggest further USD strength.
The pound rose against the dollar for the first time in almost a week, in line with a retreat in the U.S. currency, and after a survey showed UK business activity was less subdued than initially feared in September.
The British pound suffered its worst month against the U.S. dollar for a year in September, and strategists show little optimism for the rest of the year, as growth expectations weaken once again.
The month ended with GBPEUR at 1.1530 and GBPUSD at 1.22- over all the month of September was not very supportive for the Sterling and we saw a lot of weakness to end the quarter- although we have also seen a weaker Euro alongside a weaker Pound, it seems traders have found more value shorting the Pound as it was one of the better-performing currencies at the beginning of the year.
GBP/USD continued its struggle around the 1.21 area after yesterday’s strong performance from The Dollar. This was mainly due to 10 year Bond’s in The US touching 4.5% for the first time since 2007 and therefore bringing even more support to The USD.
The main talking point across the currency market is that of the Dollar gaining significant strength against both Sterling and Euro. 10yr Treasury bond yields in the US rose by more than 10 basis points and above 4.5% for the first time since 2007.
UK Core Inflation YoY (Aug) was expected to drop by 0.1% to 6.8% but released cooler than expected at 6.2%. This eases some of the pressure for the BOE on Thursday ahead of its interest rate decision, with a 25 basis points hike on the agenda.
The ECB surprised markets last week by raising interest rates by 25bps to record highs instead of keeping them on hold as initially expected- the bank now will pause on rate hikes for now and keep an eye on data- it seems the ECB believes that growth will be slow in the Eurozone but inflation could still creep up into next year.
