- GBP/USD is almost flat as the US Dollar erases its earlier gains and risk-on momentum.
- US data showed the housing market remained subdued, a headwind for the US dollar.
- Fed’s Waller: Backs rate hike by 25 bps, though doesn’t expect to cut rates until year-end.
GBP/USD swings during the North American session, around the 1.2360-1.2390 region, around the London Fix, unable to gain a clear direction. Risk appetite elevated, which it usually prefers pound Sterling (GBP) but soft UK economic data weighed on GBP/USD. At the time of writing, GBP/USD is exchanging hands at 1.2391.
GBP/USD swings between gains/losses as the US dollar pulls back
Sentiment remains positive. The US Dollar (USD) has bounced back from earlier highs as it shows US dollar indexat 102.552 holding on to tiny gains of 0.05% around 102.103. Therefore, GBP/USD rallied from the daily lows around 1.2330 ss to cut its earlier losses.
On the data front, the U.S. economic calendar showed existing home sales fell 1.5% to the lowest level since 2010, a report from the National Association of Realtors showed. The Federal Reserve’s (Fed) tightening cycle has pushed the housing market into recession. Recently, however, some Fed officials have revealed their intention to slow the pace of rate hikes and emphasized the need to keep rates higher for longer.
Philadelphia Fed President Patrick Harker supports the idea of raising rates at a slower pace, saying: “Going forward, a 25 basis point increase will be appropriate. Harker expects the US economy to grow by 1% and the unemployment rate to jump to 4.5% from 3.5%. Later, Kansas City Fed President Esther George said the Federal Reserve needed to be “patient” to see if service sector inflation eased.
Fed Board member Christopher Waller recently said that the market’s perception of the terminal rate is not far from the level of the Federal Funds Rate (FFR), adding that the US central bank would have to keep rates high, “not cut rates for a year… the end.”
Meanwhile, UK retail sales fell sharply for November and GBP/USD fell. The figures showed that sales fell by 1% month-on-month, signaling that inflation and the Bank of England’s (BoE) rate hikes are hitting Britons. Another report said UK consumer confidence fell for the first time in three months, returning to historic lows.
what to watch
Next week’s UK economic calendar will include Flash Manufacturing and Services PMI and Producer Price Index (PPI). On the US front, Flash Manufacturing and Services PMI, Q4 Advanced Gross Domestic Product (GDP), Durable Good Orders and the Fed’s preferred inflation gauge, Core PCE.