GBP/USD remains weak near 1.2250 as European trading continues on Wednesday. The US Dollar is seeing an upswing, with investors treading carefully in anticipation of Fed Chair Powell’s speech. Despite BoE Governor Bailey’s recent remarks, the Pound Sterling fails to gain traction.
GBPUSD Daily Chart
Renewed Bearish Pressure Amid Persistent USD Strength
Following a loss of over 50 pips on Tuesday, GBP/USD fluctuated within a narrow band around 1.2300 during Wednesday’s Asian session. However, the pair faced renewed bearish pressure in the European morning, dipping towards 1.2250 due to ongoing US Dollar strength.
Market Mood and US Treasury Bond Yields Influence USD
With no significant data releases, the recovering US Treasury bond yields and the cautious market sentiment are helping the USD stay resilient against major competitors.
Investors Eye Fed Officials’ Comments
Investors are keenly awaiting comments from Federal Reserve officials. Minneapolis Fed President Neel Kashkari stated that inflation and labor data would guide them regarding the next policy decision, while Chicago Fed President Austan Goolsbee noted that they have a lot of data to analyze before their December meeting.
Bailey’s Quotes Highlight Need for Financial Stability
Governor Bailey emphasized the need for vigilance against fragmentation in the global economy and financial system, stating that the costs associated with such fragmentation are real and undesirable. He also stressed the importance of implementing recommendations for enhancing the resilience of money market funds.
EUR/USD Slides Towards 1.0650 Ahead of Powell’s Speech
EUR/USD Experiences Downward Pressure
EUR/USD is slipping further, testing the 1.0650 support during the European session on Wednesday. The US Dollar’s rebound extends into a third day amid cautious market sentiment and positive US Treasury bond yields, putting pressure on the pair. All eyes are now on Fed Chair Powell’s speech.
EUR/USD Remains on the Back Foot
Despite a modest rebound in the early Asian session on Wednesday, EUR/USD lost its momentum after testing 1.0700. The near-term technical picture points to a bearish tilt. The cautious market stance allowed the US Dollar to maintain its strength on Tuesday, forcing EUR/USD to stay on the defensive.
Market Awaits Speeches from Fed Policymakers
Several Federal Reserve policymakers, including Chairman Jerome Powell, will be delivering speeches later in the day. In case Fed speakers adopt a similar tone and reiterate their data-dependent approach, the USD could find it challenging to extend its recovery, unless safe-haven flows dominate the market action in the second half of the day.
Global Market Overview: Minor Dips in European and US Equities
In the light of recent economic events, Europe’s Stoxx 600 and US equity futures experienced slight declines. On the other hand, the 10-year US Treasury yields saw a rise by three basis points to 4.6%. Notably, Marks & Spencer Group Plc reported a significant surge in profit, leading to a reinstatement of a dividend and a 10% increase in their stock price.
Central Bankers’ Response to Lower Government Bond Yields
Traders worldwide are closely watching how global central bankers will respond to the drop in government bond yields and its potential impact on inflation. In this context, Bank of England Governor Bailey has made his remarks today, while Federal Reserve Chari Powell is expected to deliver his speech later during the American Session.
The Federal Reserve and Inflation
Todd Schubert, Senior Fixed-Income Strategist at Bank of Singapore, suggests that the market is currently underestimating the Federal Reserve’s determination to bring down inflation. He believes that a sustained rally in risk assets may not occur until there is clear evidence of decreasing inflation.
Diverse Views on Monetary Policy
Fed officials have expressed differing views on tightening monetary policy and pre-committing to rate decisions. Meanwhile, HSBC strategists hint at a potential double-digit rally in global equities in 2024 if the Fed adjusts its monetary policy to avoid a recession.
Oil Prices and Asian Market Performance
Oil prices remain near a three-month low due to concerns about stagnant demand and uncertainty in the global economy. In Asia, Japan’s Topix index performance was affected by a drop in Japanese bank shares.
Potential Upswing for Chinese Equities
Chinese equities, which have been beaten-down recently, might see gains if the speculated meeting between US and Chinese leaders happens next week.
Other Key Events This Week
Investors are keeping an eye on several key events this week, including Eurozone retail sales, Germany’s Consumer Price Index (CPI), speeches by central bank officials, and releases of US economic data.
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