Soft US inflation, retail sales, and manufacturing production data created a sell-off in the buck yesterday, with the pound pushing back above $1.24 for the first time in over 1 month. The move was short-lived, however, with the rate peeling off into the New York close.
Investors are now waking up to the reality that the aggressive nature of the rate rise in the US, despite having a positive effect in reducing inflation, is beginning to take its toll on business and consumer activity. Recession is a possibility in the coming quarters as the cost of borrowing has risen so sharply.
Only time will tell, but if US data continues to underperform then the greenback should see more outflows. Watch this space.
Written by Viv Savani. 6:53am, January 19th 2023
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