Sterling had an ugly day yesterday, despite interest rate decisions from the Bank of England and the US Federal Reserve coming in as expected.
Both tossed another 75 bps hike into the fire, though the BoE’s rhetoric signalled a looser policy on the horizon.
In contrast, Fed chair Jerome Powell suggested that the terminal rate (i.e. the rate at which the Fed will draw a line in the sand) will actually be higher than expected as the bank battles to get inflation down to the 2% target.
It was these contrasting game plans that cause the pound to dip to a 13-day low of US$1.114.
A hawkish Fed could see the pound fall further against the US dollar – Source: capital.com
But this morning has seen a correction of sorts as the bulls stepped in.
With half a percent added to GBP/USD so far, the pair is currently changing hands at US$1.121.
Sterling similarly dipped against the euro yesterday, with a hefty 1.25% added to the EUR/GBP pair resulting in a nine-day high of 87.4p.
A correction has begun in Friday’s Asia trading session, pushing the pair back to 87.1p.
Sterling’s dip and recovery was also played out against the Japanese yen and the Swiss franc.
The euro continues to struggle against the US dollar. Despite some incremental gains this morning, EUR/USD has lost over 1.8% this week and is currently changing hands at US$0.978.