Forex traders are laser focused on the US inflation reading due today, which should show if the economy has in fact cooled off after running hot for so long.
Anything below 7.7% – as expected by analysts’ expectations of 7.3% – would indicate an easing … Anything above 7.7% could convince the Federal Reserve to reconsider a 75 basis point (bps) rate hike at tomorrow's last policy meeting of 2022 as opposed to the more likely 50 bps hike currently priced into the markets.
Unemployment in the UK edged higher to 3.7% in the three months to October, up from 3.6% in the previous period, meeting expectations. Though only an incremental increase, it supports a softer touch to interest rate hikes in the run-up to Thursday’s Bank of England announcement.
In the midst of the barrage of economic data, the greenback lost further ground against the pound yesterday, with GBP/USD finishing the session 0.3% higher at 1.226, where the pair has remained so far today.
GBP/USD remains trapped in the 1.226 ballpark – Source: capital.com
EUR/GBP remains below the 86p threshold, having closed at 85.90p yesterday before inching up nine pips in this morning’s Asia trading window.
Meanwhile, EUR/USD is sitting at 1.053 following a 0.2% gain for the pair on Monday.
All in all, the major currency pairs are showing minimal volatility despite a bloated financial calendar