GBP/USD dropped to a near two-year low on Thursday in reaction to softer UK macro data.Aggressive Fed rate hike bets continued underpinning the USD and added to the selling bias.
Extremely oversold conditions helped limit losses, though the set-up favours bearish traders.
The GBP/USD pair managed to rebound a few pips from a two-year low and was last seen trading just below the 1.2200 mark, down nearly 0.50% for the day.
The pair extended the overnight rejection slide from the 1.2400 mark and witnessed heavy follow-through selling on Thursday, marking the sixth successive day of a negative move. The British pound took a hit following the release of weaker UK macro data, which, along with sustained US dollar buying exerted pressure on the GBP/USD pair.
The Preliminary UK GDP report showed that the British economy expanded by 0.8% during the first quarter of 2022 as against the 1.3% growth recorded in the previous quarter and the 1.0% anticipated. Adding to this, the monthly GDP print also fell short of market expectations and came in to show that the economy contracted by 0.1% in March.
Separately, the Office for National Statistics (ONS) reported that Manufacturing and Industrial output declined by 0.2% in March, both missing consensus estimates. Moreover, the UK goods trade balance data showed that the deficit unexpectedly jumped to £23.897 billion in March from £21.614 billion recorded in the previous month.
The data reaffirmed a bleak economic outlook by the Bank of England and the National Institute of Economic and Social Research (NIESR), warning that Britain is on course to enter a technical recession. This, in turn, suggested that the current rate hike cycle could be nearing a pause and dragged sterling lower across the board.
On the other hand, the US dollar prolonged its recent strong bullish run and shot to its highest level since December 2002 amid firming expectations for a more aggressive policy tightening by the Fed. Wednesday’s release of the US CPI reaffirmed market bets for at least a 50 bps Fed rate hike move at the upcoming policy meetings on June 15 and July 27.
The prospects for rapid rate hikes in the US, along with tight global supply chains resulting from China’s zero-COVID policy and the war in Ukraine, fueled worries about a possible recession. This, in turn, took its toll on the global risk sentiment, which was evident from an extended sell-off in the equity markets and further benefitted the safe-haven buck.
EUR/USD recovers above 1.0400 after US PPI data
EUR/USD has recovered modestly from the fresh multi-year low it set below 1.0400 earlier in the day. The data from the US showed that the Producer Price Index (PPI) edged lower to 11% on a yearly basis in April from 11.5% in March, causing the US Dollar Index to erase a portion of its daily gains.
GBP/USD edges higher toward 1.2250 as dollar loses strength
GBP/USD has gained traction in the early American session and advanced toward the mid-1.2200s. The modest decline witnessed in the US April Producer Price Index (PPI) data seems to be causing the greenback to lose its appeal, helping GBP/USD rebound.
Gold retreats toward $1,840 despite falling US yields
Gold has lost its traction and retreated toward $1,840 into the American session. Although the benchmark 10-year US Treasury bond yield is down more than 3% on the day, the dollar capitalizes on safe-haven flows and weighs on XAU/USD.
Like Terra’s UST, another stablecoin lost peg and you’ll freak out when you see which one
Tether plummeted to $0.96 during Asian trading hours on Coinbase, losing its $1 peg. The largest stablecoin by market cap appears to be following the path of algorithmic stablecoin TerraUSD (UST).