- GBP / USD is the best performing joint G10 currency on Wednesday alongside the NZD.
- However, the currency markets are mostly in wait-and-see mode before the Fed meeting.
The GBP/USD it is currently trading above 1.3650, having bounced from the Asian session lows near 1.3600. With the pair rising roughly 0.3% so far this session, the British pound is the best performing G10 currency this morning alongside the New Zealand dollar. Unlike the New Zealand dollar, which is benefiting from a stellar third-quarter jobs report released during the Asian session on Wednesday, the reason for the GBP / USD’s outperformance on Wednesday ahead of the long-awaited policy announcement is unclear. monetary policy of the Fed.
Looking at forex markets more broadly, conditions are mostly subdued, with most of the rest of the major G10 companies unchanged, and traders / market participants reluctant to place big bets ahead of the meeting. Fed at 18:00 GMT and Powell’s post-meeting press conference at 18:30 GMT. The US dollar generally ignored a stronger-than-expected estimate of national employment change in October (ADP, which hit 571,000 vs. 400,000 forecast), and was unfazed by a significantly stronger ISM services PMI survey. than expected, also for October. Regarding the latter, the general index rose to its highest level since the series began at 66.7, well above the 62.0 forecast, amid a sharp rise in the business activity and new orders sub-indices, a sign that US growth momentum has picked up sharply at the beginning of the fourth quarter.
The sterling outperformance could be a reflection of economic optimism after IHS Markit released its final version of the UK services PMI survey for October this morning, in which the leading index got a decent upward revision to 59.1 from the previous estimate of 58.0, a substantial jump from the September reading of 55.4. That suggests that the momentum of economic growth has improved in the UK economy heading into October. According to Duncan Brock, Group Director of the Chartered Institute of Procurement & Supply, “The dominant service sector in the UK economy had a surprisingly good month in October with a strong rebound in overall production,
job creation and new orders as businesses and consumers began to spend again unfettered by the lockdown and pandemic restrictions ”.
Elsewhere, Brexit remains in the headlines; British Prime Minister Boris Johnson said Wednesday that the UK wants “substantial” changes to the existing Northern Ireland Protocol. Political analysts hope that the UK will soon activate Article 16, which allows the UK to take unilateral action on the deal if it considers that the application of the protocol has serious negative consequences. EU leaders are warning the UK not to take that step as it opens the prospect of more tense negotiations on trade and legal issues that may escalate, as well as threatening the ongoing UK-French fisheries dispute. The tone of the news on this latest dispute has improved in recent days, however, after the French chose not to impose retaliatory measures on access to overfishing in the UK and French government ministers recently praised the approach. constructive from the UK government in discussions on fisheries.
Looking ahead, traders won’t have much time to rest after Wednesday’s Fed event, and attention will turn to a live Bank of England meeting on Thursday, where economists are divided on whether the bank will raise prices. rates at 15 basis points or not.
Technical levels
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