The US dollar showed some fight yesterday as investors were reminded by Fed officials that interest rates will have to remain high to continue applying downward pressure on inflation. After moving above $1.24 the pound fell back towards $1.23 while EURUSD edged back into the $1.07 handle.
As we approach the final full week of January, it’s safe to say it has been a very eventful month so far. The pound was trading in the bottom half of the $1.18 handle not too long ago and has seen a strong 6-cent rally since. It’s likely such volatility continues throughout 2023 as participants adjust to the ever-changing outlook for monetary policy. Whilst the Fed will be markedly slowing down the pace of their tightening, it appears the BoE has some way to go to tame the inflation beast.
Today’s economic calendar sees retail sales data from the UK, German inflation data, and US housing numbers.
Have a great weekend.
Written by Viv Savani. 7:27am, January 20th 2023
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