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US GDP figures present another opportunity for currency volatility on Wednesday.
The pound regained some stability in yesterday’s session, which saw attention variously turn from Israel to the USA and then back to Israel again. More focus on the political comings and goings has given proceedings a volatile flavour with sentiment liable to turn at the drop of a hat – a major threat to those exposed to currency fluctuations, particularly with a major data set to arrive from the US this afternoon.
Israel’s cabinet last night approved a ceasefire (designed to be permanent, according to Joe Biden) with Hezbollah in Lebanon. Minutes from the Federal Reserve’s monetary policy committee (FOMC) meanwhile showed growing confidence that inflation was falling under control, although this afternoon’s lineup of GDP and core PCE price increases pose a threat to the US dollar. Sterling climbed against both the euro and the US dollar in early trading.
The pound overcame a few bumps in the road yesterday to finish broadly level with where it began against the US dollar and the euro. The same could also be said for EUR/USD on a day that was marked by the high level of speculation and little hard detail.
Deputy Bank of England governor Clare Lombardelli this morning said that the cost of any US tariffs would hit the British economy hard. Should Trump level tariffs on British goods, Lombardelli predicted that long-term productivity would be hit by increased friction and barriers to growth.
Speaking of which, Donald Trump was up to his old tariff tricks again. The president-elect started Tuesday by threatening neighbours Mexico and Canada with even higher tariffs on “day one” of his term due to various perceived transgressions. Mexico responded with a swift threat of retaliation but that didn’t prevent the Mexican peso from falling by 2% against the US dollar.
A pair of car manufacturers put their names alongside Volkswagen as the latest to take part in a shift in the European auto market. Vauxhall owner Stellantis said it would relocate its factory in Luton to Cheshire, putting over 1000 jobs at risk. Ford had previously announced it was axing 4000 jobs in Europe, leaving many wondering if the future of the industry as a whole was in question.
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GBP: Clinging to European performance
For GBP/USD, it’s been a case of the less said the better with the pair now below the level it started the year. It’s a different story for the pound against the euro. Despite volatility, GBP/EUR has trended broadly in the same direction – towards the highs it set in the summer.
GBP/USD: the past year
EUR: Germany awaits GfK
Germany’s GfK consumer climate survey has not climbed out of negative territory in three years. The country’s economic malaise has put a cap on any euro successes and despite an uptick recently, the euro will need Germany to pull its weight to combat Trump’s tariffs.
GBP/EUR: the past year
USD: Fed strikes positive note
FOMC minutes last night signalled more progress in the American economy’s fight against inflation. “Almost all participants agreed that risks to achieving the Committee’s employment and inflation goals remained roughly in balance”, the minutes read. With American markets due to close tomorrow for the long Thanksgiving weekend, today’s data is the last main hurdle standing between the US dollar and one of its most dominant months in recent memory.
EUR/USD: the past year
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