- The US is set to post the best weekly performance in more than two months triggered by hawkish comments from Federal Reserve policymakers. The US Dollar Index currently trades at 105.92, posting a 0.86% 5-day move.
- Fed Chair Jerome Powell stressed in his speech at the IMF conference in Washington last night that the central bank is willing to raise interest rates again if needed to suppress inflation. Powell also stated, “we will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening”.
- Yesterday’s speech showed that their rhetoric needs to stay hawkish until they have seen further improvement on inflation. US CPI is due next week (Tue.) and will be the next key driver for the US Dollar and the market is positioning accordingly.
- The UK have just missed the start of a recession in the third quarter, against many estimates. The UK GDP expanded 0.6% in Q3 YoY, vs. 0.5% estimated and it stagnated quarter-on-quarter, the weakest in four quarters, posting 0.0%, but beating the 0.1% contraction expected. This set of growth data gives fresh hope that the UK can dodge a recession but there is a fine line between stagnation and contraction until the end of the year.
- Sterling advanced on the news to touch 1.2238, but it has corrected most of the move, currently trading at 1.2226. The market keeps looking for reasons to sell sterling and adding that we have US CPI next week, it is unlikely that traders will trade these fresh growth numbers.
- The euro keeps treading water against the greenback following hawkish words from Fed Chair Jerome Powell, leaving the pair below 1.07. EUR/USD dropped as much as 0.39% on Thursday, and we are currently trading at 1.0660’s. Christine Lagarde is due to speak today, as well as other FOMC members but the US CPI next week remains the key focus point.
