USD bounced back off its 50% year-to-date retracement after the ISM services report came much higher than expected to 56.5 in November. As we have seen, markets have been selling the USD aggressively of late, and this better than expected print, adding onto the US job numbers on Friday, has given buyers an opportunity to buy at a 50% discount to the peak in USD rates this year.
Fed peak rate expectations nudged above 5% briefly, following the data backing calls from Fed members that Fed rates may well have to go beyond 5% next year.
EU composite PMIs came in the same as previously, but retails sales fell to 1.8%.
UK PMIs just missed expectations, coming in at 48.2.
Commodity currencies, AUD, NZD, and CAD all weakened following a drop in natural gas and WTI Crude prices.
Overnight, the Reserve Bank of Australia hiked interest rates by 0.25%, taking the base rate to 3.10%. Money markets now estimate an additional 0.50% worth of hikes going into July 2023, taking the terminal rate to 3.60%. The Bank stated that future rate hikes will be data dependent, and that they are not on a pre-set path. AUD gained off the news with GBPAUD weakening off the March high and resistance level.
Overnight Beijing announced they will scrap Covid testing requirements in most public places like supermarkets. Number of daily cases in China have eased off the 27th November highs of 38,808, now down to 27,164.
The British Retail Consortium reported that retail sales came up 4.1% year-on-year in November, with sales likely influenced by early Christmas shopping and World Cup promotions.
Following the China news overnight and retails sales report, we are seeing GBP regain some of the losses from yesterday in early trade. Better than expected construction PMIs could add to those gains on otherwise what looks to be a quiet day. The USD gains from yesterday’s service sector have not continued, with the USD weaker across the board this morning.
After hitting the lows seen in September, GBP has made some significant gains, and going into year-end & looking into 2023, current levels present great hedging opportunities.
GBPAUD once again hit the March 23 resistance level this morning before coming back off again after the RBA hiked rates by 0.25%. China reopening news flows are also prompting demand for AUD, capping gains for GBPAUD. Even still it’s worth noting that the pair has retraced over 75% of its year-to-date move lower, thus presenting great opportunities to look at hedging AUD needs.
Equals Market Analysis– 06th December 2022
Today’s Market Rates
Today’s Interbank Rates at 10:00 am against sterling movement.
GBP>EUR – 1.1605
GBP>USD – 1.2177
EUR>USD – 1.0493
GBP>CAD – 1.6567
GBP>AUD – 1.8130
GBP>SEK – 12.626
GBP>AED – 4.4709
GBP>HKD – 9.4740
GBP>ZAR – 21.091
GBP>CHF – 1.1485
· USD Goods and Services Trade Balance(Oct)
· CAD International Merchandise Trade(Oct)
· CAD Ivey Purchasing Managers Index(Nov)
· CAD Ivey Purchasing Managers Index s.a(Nov)
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