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Economists worldwide turn to the US dollar as a safe haven currency
After UK inflation held steady yesterday at 6.7%, the pound shot up against its major rivals but by the end of the day was unchanged against the euro and down half a per cent against the US dollar.
Economists believe the renewed strength of the greenback follows investors’ risk aversion tactics which consider the US dollar a safe-haven asset amid ongoing tensions in the Middle East.
Global stocks across Europe fell for a second consecutive session this morning and government bond yields continued to rise.
Oil prices rose on Wednesday following a blast at a Gaza hospital that killed and injured hundreds of Palestinians. It also caused concerns about global oil supply disruption. The global benchmark, Brent crude futures, edged up $3, or more than 2%.
In the eurozone, inflation fell to 4.3% in September from 5.2% in August and the lowest since October 2021.
New residential construction projects in the US rebounded by 7.7% in September to a seasonally annualised rate of 1.36 million. This fell short of a 1.38 million estimate but rebounded from the three-year low of 1.27 million in August.
In Australia, the jobless rate was at an unexpected three-month low of 3.6% in September easing from August’s rate and expectations of 3.7%.
Today is quiet on the data front with a speech from Federal Reserve chair Jerome Powell at 5 pm (UK time). Tomorrow, the spotlight will be on UK consumer confidence and retail sales.
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GBP: BoE’s uncertainty adds pressure
While data remains light, GBP/EUR traders seek guidance on the next policy action from the Bank of England, which is seen as a key factor acting as a headwind for the currency pair.
GBP/USD: the past year
EUR: France’s business confidence falls
The manufacturing climate indicator in France fell to 98 in October from 99 in September. This was slightly below forecasts of 99 and evaluation expectations deteriorated for personal production (5 vs 17) and general production (-10 vs -6).
USD: All eyes on Powell
US investors trade with caution ahead of Fed chair, Powell’s speech this afternoon at the Economic Club of New York luncheon. His attitude towards policy outlook will be closely scrutinized. Markets currently have an interest rate pause priced in for November.
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