GBP

Sterling moved towards a three-month high versus the euro and a one-month high against the US dollar as the more positive mood within broader markets encouraged investors back into currencies considered riskier during uncertainty.

The British pound extended its weekly advances amidst a positive market reaction following the Federal Reserve’s decision to raise interest rates a further 75 basis points. The Fed’s decision was always going to be this week’s major market event and has proven supportive for the pound. The Fed’s decision to raise interest rates was expected but markets reacted positively to guidance that there would not be any acceleration in the pace the Fed intends to hike rates.

USD

The dollar fell on Wednesday against a basket of major currencies after the Fed raised interest rates, and comments from Fed Chair Jerome Powell spurred hopes for a slower hiking path. The central bank raised rates by 75 bps for the second straight meeting as it attempts to rein in inflation but noted that, while the labour market remains strong, other economic indicators have softened.

Yesterday saw the US GDP data release with annual GDP coming in at -0.9% and Q2 figures rising from 8.3% to 8.9%. The US have now entered into a technical recession, extending the fears of economic chaos.

Key announcements

10:00 – EUR – Flash CPI estimate y/y – forecast 8.7%
10:00 – EUR – Core CPI Flash – estimate 3.9%
13:30 – USD – Core PCE – forecast 0.5%