The GBP/USD Pair Is Trading Just Above 1.20, The Australian Dollar Is The Strongest Today
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The US Dollar is weaker today as markets appear to be restoring their signal ahead of next week's holiday. Chinese words about stimulating economic growth strengthened risk sentyment.
The Australian Dollar is the biggest gainer today as the generally more optimistic sentiment towards risky assets helped to bolster it.
Later in the day, the focus will be on US GDP, which is expected to improve for the third time in a row, revealing a downside risk for the EUR/USD pair.
In addition, central banks must balance the need to fight inflation with the risk of further deepening of the economic slowdown.
EUR/USD
EUR/USD keeps trading above 1.06 for another day. For a significant part of the day, the pair traded in the range of 1.0630-1.0660. It is currently trading below 1.0630, 1.0622 to be precise
The euro has a strong start to Thursday's European session with the dollar weakening. In addition, de Guindos of the European Central Bank (ECB) upheld the hawkish narrative, stating that "50 basis points may soon become the new standard" to quell rising inflationary pressures in the eurozone.
GBP/USD
The cable pair dropped to 1.2040. The British pound traded around $1.21, down slightly from its recent six-month high of $1.2446 as investors weighed less hawkish BoE and economic outlook.
Analysts mainly see the risk of the pound falling between now and the end of the year as the UK economy is stuck in stagflation conditions.
The outlook for the UK is still pretty bleak.
The UK economy contracted slightly more than originally estimated in the third quarter and business investment performed poorly, the Office for National Statistics said on Thursday.
Household spending and business investment fell significantly, boosting expectations that the British economy was heading into recession.
Most services sub-sectors experienced a slowdown, however, services output increased by 0.1% in Q3 2022, revised upwards from the first estimate of solid output. Compared to pre-coronavirus (COVID-19) levels, service output is now 1.3% lower than in Q4 (October-December) 2019.
USD/JPY
USD/JPY dropped from 137.50 to 130.50 in no time. It has since stabilized. USD/JPY in the Asian session fell to around 131.70, in the European session the pair rose above 132.10.
The yen firmed on Thursday, returning towards a four-month peak against the dollar hit this week after an unexpected tweak to the Bank of Japan's bond yield controls spurred bullish yen bets.
Japan is the largest holder of government bonds and once again, if domestic yields move north, the world's largest debt market could be affected.
The bank's new CEO is due to be appointed in April 2023, and there is a perception that he could pave the way for the new leader to tighten policy in the face of accelerating inflation.
The yen is used as a funding currency by some investors, and the rise in Japanese yields changes the price dynamics for these participants.
AUD/USD
Yesterday, at the end of the day, the exchange rate was below $0.67, but closer to midnight it started to increase. The new day will start with an increase in the Aussie pair. It peaked at 0.6769, then you start to fall. Trading is at 0.6726
The sentiment-linked Australian dollar outperformed its major counterparts on Wednesday, benefiting from a cautious improvement in risk appetite.
The aussie also benefited from a general weakness in the US dollar, as well as hopes for more pro-growth policy measures in China.
Earlier in December, the Reserve Bank of Australia raised its policy rate by 25 basis points to 3.1%, taking borrowing costs to a level not seen in a decade.
Source: dailyfx.com, investing.com, finance.yahoo.com
