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Too much pessimism around the british pound currency

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british pound currency

The British pound currency fell in price against the European common currency and the U.S. dollar on Thursday, and it continues to fall on Friday. The reason for that was business data publication, which showed that the British economy had already plunged into recession. Also, the local strengthening of the US dollar puts considerable pressure on the pound.

The S&P Global/CIPS UK Purchasing Managers’ Index (PMI) for December was revised lower. New business declined for the second month in a row, and the survey’s employment index fell to its lowest level since February 2021. The British pound currency paired with the euro fell 0.11% to 88.49 pence. GBP/USD was down 0.33% to 1.1867 by this time.

British pound chart — what factors form the vector of the movement?

There is too much pessimism about the UK today as the British economy is almost certainly in recession. There is a wave of strikes across the country and the crisis is hitting almost all sectors, including the rail network. Prices continue to rise, the welfare of citizens is significantly reduced, migrants are coming into the country at a record rate, the cost of living is rising steadily, while workers’ wages have not increased for more than 10 years, leaving many of them unable to make ends meet.

On top of this, the country is about to enter a period of profound political crisis, fertile ground for which Liz Truss’ short-sighted policies have prepared. It is clear that after the failures of the previous prime minister, public discontent, and skepticism toward the new government persists. In his New Year’s address, the new prime minister, Rishi Sunak, promised the annoyed British public that from now on the country’s policy would have one goal: to meet the needs of the population.

But one way or another, representatives of the Bank of England are confident that in 2023 Britain will not be able to avoid a deep economic crisis. Moreover, they expect that the recession will be even stronger than in the other G7 countries.

Earlier we reported that the news from the U.S. helped stock indices to close the week on the plus side.



Forex

Asia FX muted with nonfarm payrolls in sight; Yen scales 4-mth peak

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Asia FX muted with nonfarm payrolls in sight; Yen scales 4-mth peak
© Reuters.

Investing.com – Most Asian currencies moved little on Friday as traders positioned for a potentially softer U.S. nonfarm payrolls reading, while the yen sat near a four-month high to the dollar tracking hawkish signals from the Bank of Japan. 

The was the best-performing Asian currency this week, up over 2% after BOJ Governor Kazuo Ueda signaled that the central bank was considering an eventual move away from negative interest rates. 

The yen rose 0.2% to 143.88 against the dollar on Friday. 

Ueda’s comments, made during an address on Thursday, sparked a sharp reversal in bets for more weakness in the yen, while reinforcing expectations that the BOJ will end its negative rate regime in 2024.

This helped the yen strengthen past data showing that Japan’s in the third quarter. Ueda also noted that policy will remain loose in the near-term to keep supporting the Japanese economy. 

Dollar weakens as markets bet on softer nonfarm payrolls 

Broader Asian currencies were muted, while the dollar reversed a recent rebound following a string of soft labor market readings this week.

The and steadied in the mid-103s in Asian trade, after falling sharply on Thursday.

and readings suggested that the U.S. labor market was cooling, potentially setting the scene for a softer reading for November, which is due later in the day. 

Any signs of a cooling labor market give the Federal Reserve less impetus to keep interest rates higher for longer. Friday’s reading also comes just days before the for the year, where the central bank is expected to keep rates on hold.

But markets were still seeking more cues on when the Fed could begin cutting rates in 2024. Expectations that had boosted Asian currencies in recent sessions. 

Most regional units moved little in anticipation of the payrolls reading. The fell 0.1%, and was set for mild weekly losses amid persistent concerns over an economic slowdown in China. Dollar selling by Chinese state banks helped limit losses in the yuan this week. 

The was flat after the kept rates on hold as widely expected, and said that monetary policy will remain restrictive to curb persistent risks from inflation. 

The rose 0.2%, but was set to lose 0.8% this week following a string of weak economic readings. A slowdown in China, Australia’s biggest export market, appeared to be spilling over into the country. 

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Forex

Asia FX muted with nonfarm payrolls in sight; Yen scales 4-mth peak

letizo News

Published

on

Asia FX muted with nonfarm payrolls in sight; Yen scales 4-mth peak
© Reuters.

Investing.com – Most Asian currencies moved little on Friday as traders positioned for a potentially softer U.S. nonfarm payrolls reading, while the yen sat near a four-month high to the dollar tracking hawkish signals from the Bank of Japan. 

The was the best-performing Asian currency this week, up over 2% after BOJ Governor Kazuo Ueda signaled that the central bank was considering an eventual move away from negative interest rates. 

The yen rose 0.2% to 143.88 against the dollar on Friday. 

Ueda’s comments, made during an address on Thursday, sparked a sharp reversal in bets for more weakness in the yen, while reinforcing expectations that the BOJ will end its negative rate regime in 2024.

This helped the yen strengthen past data showing that Japan’s in the third quarter. Ueda also noted that policy will remain loose in the near-term to keep supporting the Japanese economy. 

Dollar weakens as markets bet on softer nonfarm payrolls 

Broader Asian currencies were muted, while the dollar reversed a recent rebound following a string of soft labor market readings this week.

The and steadied in the mid-103s in Asian trade, after falling sharply on Thursday.

and readings suggested that the U.S. labor market was cooling, potentially setting the scene for a softer reading for November, which is due later in the day. 

Any signs of a cooling labor market give the Federal Reserve less impetus to keep interest rates higher for longer. Friday’s reading also comes just days before the for the year, where the central bank is expected to keep rates on hold.

But markets were still seeking more cues on when the Fed could begin cutting rates in 2024. Expectations that had boosted Asian currencies in recent sessions. 

Most regional units moved little in anticipation of the payrolls reading. The fell 0.1%, and was set for mild weekly losses amid persistent concerns over an economic slowdown in China. Dollar selling by Chinese state banks helped limit losses in the yuan this week. 

The was flat after the kept rates on hold as widely expected, and said that monetary policy will remain restrictive to curb persistent risks from inflation. 

The rose 0.2%, but was set to lose 0.8% this week following a string of weak economic readings. A slowdown in China, Australia’s biggest export market, appeared to be spilling over into the country. 

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Forex

Dollar at 2-week high, euro softer as market bets on rate cuts

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Dollar at 2-week high, euro softer as market bets on rate cuts
© Reuters. U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Hannah Lang

WASHINGTON (Reuters) -The U.S. dollar was at a two-week high on Wednesday, while the euro was weak across the board as markets ramped up bets that the European Central Bank (ECB) will cut interest rates as early as March.

Although markets are still pricing at least 125 basis points of interest rate cuts from the U.S. Federal Reserve next year, the dollar was able to hold steady as rate cut bets for other central banks intensified.

The , which measures the currency against six other majors, was last up 0.19% at 104.16. The euro was down 0.29% to $1.0764.

Traders are betting that there is around an 85% chance that the ECB cuts interest rates at the March meeting, with almost 150 basis points worth of cuts priced by the end of next year. Influential ECB policymaker Isabel Schnabel on Tuesday told Reuters that further interest rate hikes could be taken off the table given a “remarkable” fall in inflation.

The euro also touched a three-month low against the pound, a five-week low versus the yen and a 6-1/2 week low against the Swiss franc.

“It’s a reasonably sized sell-off and the market is trying to digest, is it just a correction? Did the market get over-exuberant in the previous weeks? I think there is definitely an element of that,” said Amo Sahota, director at FX consulting firm Klarity FX in San Francisco.

‘A BIT OVERBOARD’

The ECB will set interest rates on Thursday next week and is all but certain to leave them at the current record high of 4%. The Fed and Bank of England are also likely to hold rates steady next Wednesday and Thursday respectively.

The Bank of Canada on Wednesday held its key overnight rate at 5% and, in contrast to its peers, left the door open to another hike, saying it was still concerned about inflation.

Traders have priced around a 60% chance of the U.S. central bank cutting rates in March, according to CME’s FedWatch tool.

“Markets have aggressively priced in rate cuts, without any kind of confirmation from central banks,” said Adam Button, chief currency analyst at ForexLive in Toronto. “As December continues, we need either a change in tune from central bankers or a repricing in markets.”

If the Fed were to cut rates as markets expect, it could result in the dollar loosening its grip on other G10 currencies next year, dimming the outlook for the greenback, according to a Reuters poll of foreign exchange strategists.

The spotlight in Asia was on China, as markets grappled with rating agency Moody’s (NYSE:) cut to the Asian giant’s credit outlook.

The offshore was flat at $7.1728 per dollar, a day after Moody’s cut China’s credit outlook to “negative”.

China’s major state-owned banks stepped up U.S. dollar selling forcefully after the Moody’s statement on Tuesday, and they continued to sell the greenback on Wednesday morning, Reuters reported.

Elsewhere in Asia, the Japanese yen weakened 0.15% versus the greenback at 147.38 per dollar. The Australian dollar fell 0.02% to $0.65495.

In cryptocurrencies, bitcoin eased 0.06% to $44,049, still near its highest since April 2022.

The world’s largest cryptocurrency has gained 150% this year, fueled in part by optimism that a U.S. regulator will soon approve exchange-traded spot bitcoin funds (ETFs).

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