The darkening economic outlook drove fresh safe-haven demand for the US Dollar on Wednesday. The US dollar changed little after some of America's biggest banks warned of an impending recession The Fed, Bank of England (BoE) and European Central Bank (ECB) will set interest rates next week and central bankers will enter a period of silence before meetings.
- Positive reports appeared in the euro zone.
- Policymakers enter a period of calm ahead of key meetings of the Bank of England, the Federal Reserve and the European Central Bank
- Australian Dollar is facing renewed pressure.
- BoJ board member Nakamura once again encouraged the JPY bears
EUR/USD may be bearish?
The EUR/USD pair trades close to 1,050. Any breakout lower than 1.045 will be considered bearish. Economists at ING note that the pair could move lower to 1.0400.
The European currency is expected to closely follow the dynamics of the dollar, the impact of the energy crisis on the region and the divergence between the Fed and the ECB. Additionally, the markets' overestimation of the potential Fed policy reversal remains the sole driver of the pair's price action for now.
There were further concerns about the impact of colder winter conditions, especially in the context of the still uncertain energy situation.
Positive reports appeared in the euro zone. Employment rose slightly and the GDP Y/Y and GDP Q/Q readings turned out to be higher than expected. GDP Y/Y increased to 2.3% against the expected 2.1%, while GDP Q/Q increased by 0.1% to 0.3%. Speeches by members of the European Central Bank will also take place today, but they are not expected to have a significant impact on the euro exchange rate.
GBP/USD holds gains above 1.2150
The GBP/USD pair is trading around 1.2190.
The pound strengthened against the dollar on Wednesday to a nearly six-month high as policymakers enter a period of calm ahead of key meetings between the Bank of England, the Federal Reserve and the European Central Bank.
There are no significant macroeconomic events for the pound today.
The Bank of England raised interest rates from 0.1% to 3.0% in the current monetary policy tightening cycle, with markets pricing in an interest rate peak of around 4.6% next year. Economists predict the Bank of England will decide to raise interest rates by 50 basis points next Thursday. One BoE policymaker said higher interest rates could lead to a deeper and longer recession.
Yesterday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1%
The Australian dollar failed to hold its gains and it is facing renewed pressure after data showed that the Australian economy expanded less than expected in the third quarter.
Annual GDP by the end of July was 5.9% instead of the expected 6.3% and the previous reading of 3.6% was revised down to 3.2%. Overall, national data show a strong economy.
Yesterday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1%, taking borrowing costs to a level not seen in a decade, and further tightening is expected to bring down inflation.
A board member of the Bank of Japan (BoJ) said that adjusting monetary policy would be premature
The currency pair is trading around 137.3590.
BoJ board member Nakamura once again encouraged the JPY bears with his statement. A board member of the Bank of Japan (BoJ) said that adjusting monetary policy would be premature.
Source: dailyfx.com, investing.com, finance.yahoo.com