Yesterday it was reported by Pantheon that the British pound has been particularly volatile against the US dollar in recent weeks.
That was certainly proved accurate by the session’s end when GBP/USD closed 1.8% lower at 1.219 - the biggest daily dip since November 3.
Bearish price action continued in this morning’s Asia trading window, with the pair creeping down to 1.218.
Cable’s bearish reversal followed a 50 bps rate hike from the Bank of England. This was widely expected, but more surprising were the two votes to leave rates unchanged, even though inflation is still in double digits.
Cable’s volatility streak continues – Source: capital.com
The pound also contended with a surge by the dollar following a pretty hawkish tone emerging from the US Federal Reserve, even though the 50 bps rate hike on Wednesday yielded no surprises.
The US Dollar Index (DXY) added a full percentage point to close at 104.17. DXY is currently sitting at 104.07 in the opening Friday hours.
Sterling also fell sharply against the euro, with EUR/GBP jumping 1.5% to 87.34p. The pair continued to rise in today’s Asia session, and at the time of writing was changing hands at 87.34p.
The pound could be expected to keep falling, given this morning’s pretty rough retail numbers. Sales in the UK decreased by 5.9% year-on-year in November, worse than the 5.6% decline predicted by the market.
Eurozone inflation figures are due later today, with 10% the going forecast. Anything softer than that could see the euro cool off a bit.