GBP was broadly lower yesterday, as markets showed concern that wage growth was proving to be sticky whilst the unemployment rate worryingly increased in the three months leading up to September. USD continued to eke out additional gains as treasury yields continued to rise ahead of todays CPI numbers. GBPUSD found new lows and EURUSD hit fresh 2024 lows.
*Daily move - against G10 rates at 7:30am, 13.11.24
** Indicative rates - interbank rates at 7:30am, 13.11.24
As we've recently witnessed, USD has been favoured by markets in the belief that the Trump administration will put inflationary pressures on the US economy, thus seeing markets unwind rate cuts by the Federal Reserve (Fed). As such, today's CPI numbers will be closely examined to determine if we see a further unwinding of these rate cut bets and subsequent further gains for USD.
For GBP, it was very interesting to note the price action yesterday where the pound fell on the higher unemployment number instead of trading higher on the sticky wage number. Perhaps more focus is falling on economic growth rather than where interest rates will be? It's worth remembering markets have been positioned long on GBP for most of this year already. The basis for this was the idea that the markets had already priced the Bank of England (BoE) to administer the least amount of rate cuts in their easing cycle this year compared to their peers. So perhaps this factor for GBP is fully priced in now? One thing is certain: it brings Friday’s GDP number into focus – let's see how the market reacts.
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