- GBP/USD is confidently shifting its business above 1.2100 amid a recovery in the risk appetite theme.
- Consideration of a 50 bps rate hike in the FOMC minutes could stem the dismal market mood.
- The UK economy is avoiding recession, however, chances of further escalation in CPI are accelerating.
The GBP/USD pair is building the auction platform above the round-level support of 1.2100 in the Asian session. The Cable is getting some strength as the risk appetite of the market participants is improving gradually.
S&P500 futures have firmly rebounded after an intense sell-off on Tuesday, portraying a sense of optimism in the overall negative market mood. The US Dollar Index (DXY) is struggling to extend its recovery above 103.80. Also, the 10-year US Treasury yields have dropped marginally below 3.94%.
Investors should brace for a volatility explosion after the release of the Federal Open Market Committee (FOMC) minutes. The release of the FOMC minutes will provide a detailed explanation behind the 25 basis points (bps) interest rate hike in the first week of February. The context that will be keenly watched by the market participants is the guidance on the interest rates.
Two hawkish policymakers, Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard cited last week that they saw the case for doing another 50 basis-point hike at the meeting and that such larger moves should still be on the table for upcoming decisions, as reported by Bloomberg. And, consideration of a 50 bps rate hike could stem dismal market mood.
On the United Kingdom front, rising uncertainty over the Northern Ireland Protocol (NIP) is impacting the Pound Sterling. The context might be compromised this week, however, the impact on the economic outlook of the UK will be observed after a few months. Meanwhile, Conservative rebels are continuously opposing the proposal.
Meanwhile, Tuesday’s upbeat preliminary UK PMI data cleared that retail demand is solid and the labor demand will stay for longer. No doubt, the economy is confidently avoiding recession, however, the chances of further escalation in the inflationary pressures are accelerating. Economists at UOB Group are expecting 25bps hikes at the next 2 meetings on 23 Mar and 11 May by the Bank of England (BOE), seeing the Bank Rate peak at 4.5%.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.