The UK Prime Minister Boris Johnson resigned from his post and will remain until a new PM is elected.The greenback is trading soft amidst an increase in risk appetite.
Fed’s Waller backs 75 bps increases and added that the US economy is strong.
After a rough week in UK politics, the British pound reclaimed the 1.2000 level as UK Prime Minister Boris Johnson announced he would resign in autumn. However, he would remain as Prime Minister and announced that his government would not seek new policies or changes and would be left to the new PM. At the time of writing, the GBP/USD is trading at 1.2000.
GBP/USD advances on a soft US dollar, US Initial Jobless Claims rise
US equities remain positive during the day, reflecting recession fears waning and investors’ positive mood. Meanwhile, US Treasury yields rise, and the greenback retracts from 2-year highs, a tailwind for the GBP/USD. The US Dollar Index, a measure of the greenback’s value vs. its peers, has recovered some, up 013%, back above the 107.000 mark.
The financial markets have been in turmoil over the week. On Wednesday, the Federal Reserve revealed June’s monetary policy minutes, which showed the central bank’s pledging to tackle inflation, even at the expense of slower economic growth. Policymakers reiterated a 50 or 75 bps for the July meeting, and if inflation persists, they will take a “more restrictive” monetary policy stance.
In the meantime, Huw Pill, the Bank of England Chief Economist, said that he would consider a fast pace of interest rate rises to tackle high inflation from becoming entrenched. Also, Catherine Mann, a member of the BoE’s Monetary Policy Committee (MPC), said that she saw a case for faster rate hikes.
At the time of writing, Fed speakers are crossing the wires. St. Louis Fed President James Bullard said the US economic output is expected to continue expanding through 2022. At the same time, Fed’s Governor Christopher Waller backed a 75 bps rate hike in July and would like to step back to a 50 bps increase in September. Waller added that fears of a recession are overblown and that the US economy is strong.
The US economic docket reported Jobless Claims for the week ending on July 2. The figures came higher than expected, though the labor market showed moderation. Furthermore, the Balance of Trade shrank the deficit from -$86.7 billion to -$85.5 billion, spurred by a jump in exports.
What to watch
The US calendar on Friday will feature the New York Fed President John Williams crossing newswires and June’s Nonfarm Payrolls report, expected at 268K, from 390K in the previous reading. A subcomponent to look at is Average Hourly Earnings, expected at 5%, lower than May’s 5.2%.
EUR/USD drops to lowest level since December 2002 near 1.0150
EUR/USD has extended its slide in the American session and touched its weakest level in nearly two decades near 1.0150. With the 10-year US T-bond yield rising more than 2% on the day, the greenback preserves its strength, forcing the pair to continue to push lower.
GBP/USD rebounds above 1.2000 on hawkish BOE commentary
GBP/USD has regathered bullish momentum and climbed above 1.2000 during the American session. BOE policymaker Catherine Mann said on Thursday that the uncertainty about the inflation process strengthens the case for front-loading interest rate rises.
Gold: Dollar poised for another run higher
Gold trades at $1,742, consolidating its latest losses. The better tone of equities following the release of the FOMC Meeting Minutes put a halt to panic, but the song remains the same. Chances of a global recession continue to increase in an overheated inflation environment.