China moving away from draconian Covid measures

GBP

Sterling rallied to its best level for three months against the US dollar and appreciated against the euro with it benefiting form market sentiment shifting to risk-on.

As a risk sensitive currency, the British pound has shown to be a benefiter when market sentiment improves. Comments from US Federal Reserve Chair Jerome Powell earlier in the week fuelled a risk rally, with Powell stating that the pace of tightening US interest rates could slow as soon as December. As a result of these comments, markets are now fully pricing a 50 basis points interest rate hike from the Fed this month, ending a run of four consecutive hikes of 75 basis points.

Added to this, rumours that China could be moving away from its draconian Covid measures also improved risk-appetite. According to reports, Vice Premier Sun Chunlan stated on Thursday that China’s fight against the pandemic is at a new stage as the Omicron variant is becoming less pathogenic since more people are getting vaccinated.

USD

The dollar continued its retreat on Thursday as a combination of a risk rally and further signs of an economic slowdown in the US weighed on the US currency. According to the data, ISM Manufacturing PMI for November fell below expectations of 49.8 to read 49. Whilst US annual core PCE inflation fell to 5% as expected.

Key announcements

13:30 – USD – Non-Farm Payrolls expected 200k down from 261k