ECB Policy Decision Next Week (EUR/USD), Liz Truss’ Letter Of Resignation Supporting GBP (EUR/GBP, GBP/USD)

Summary:

• The story of fighting inflation is once again being told as US Treasury yields rise.
• Pound had been trading higher versus the majority of the major currencies.

Euro bullish against USD

The market is reflecting bullish signals for this currency pair. The story of fighting inflation is once again being told as US Treasury yields rise. The yields on the carefully watched 2- and 10-year USTs are at 4.59% and 4.165%, respectively, the highest levels in around 15 years. Recent remarks from Fed officials confirm that, in the ongoing battle against intense price pressures in the US, the central bank will increase rates further and for a longer period of time if necessary. Later in the session, four Fed officials—Harker, Jefferson, Cook, and Bowman—speak and are likely to reiterate recent Fed rhetoric.

The European Central Bank (ECB), which will announce its most recent policy decision the following week, is expected to raise rates by 75 basis points. The ECB is scheduled to raise rates further over the upcoming months, providing the single currency with some support as Europe continues to struggle with headline inflation that is close to double digits.

✕ EUR/USD Price Chart

GBP supported in the wake of Liz Truss Resignation

The market is reflecting mixed signals for this currency pair. The reported departure of Prime Minister Lizz Truss, which will be followed by an unspecified procedure to choose her replacement, caused an earlier Dollar-induced gain to temporarily stall. This caused volatility in the Pound Sterling exchange rates throughout Thursday trade. Near the North American Open on Thursday, Prime Minister Lizz Truss made the announcement that she would continue in office for a week while steps were taken to select who would succeed her as leader of the ruling Conservative Party and in 10 Downing Street.

This occurs toward the end of a month-long uprising against the recently elected Prime Minister, which was ostensibly led by former ministers who were not involved in the decision-making process for the new cabinet or the decisive stage of the most recent party process. Prior to the news, the pound had been trading higher versus the majority of the major currencies after yo-yoing during the session between the top and bottom of the major currency league table.

✕ EUR/GBP Price Chart

Fed remains hawkish

The market is reflecting bearish signals for this currency pair. According to James Bullard of the Fed, a 75 basis point increase at their November meeting was plausible, and a similar increase at their December meeting is anticipated. Charles Evans, another member of the board, expressed hawkish views, albeit to a lesser extent, when he claimed that the Fed was prepared for a variety of circumstances. According to US Vice President Joe Biden, corporations that produce energy should forgo dividend payments and share repurchases. He suggested that they concentrate on raising production instead.

Liz Truss, the prime minister of the UK, has announced her resignation, claiming she is unable to carry out the mandate she was elected on. Within the following week, the Conservative Party will hold its leadership contest, and Ms. Truss will continue serving as prime minister until her replacement is chosen.

✕ GBP/USD Price Chart

Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com