Pound tumbles across the board on Friday.EUR/GBP is having best day since March 2020.After a brief pullback, EUR/GBP resumed the upside and hit levels above 0.8900 for the first time since 2020. So far, the cross peaked at 0.8910. It is hovering around 0.8900, up 170 pips for the day, the best performance since March 2020. A sharp decline of the pound and risk aversion are driving the move.
Higher rates not helping GBP
On Thursday the Bank of England raised the key interest rate by half a percentage point to 2.25%. The UK government announced on Friday a massive tax cut package. The measures offered no real support for the pound. Also, UK bonds are collapsing on Friday.
“The implication is that a deteriorating budget deficit, and a persistently and likely continued deterioration in the current account will weigh negatively on GBP. In this environment, rising rates and favourable interest rate differentials are not supportive for GBP at this time. With risk sentiment and the global growth outlook worsening, the market may need to consider how non-trivial a move to parity for GBPUSD may be. Meanwhile, EUR looks better situated, for now, versus GBP. The move above 0.88 sets the stage for a higher new range bound by 0.90/0.92”, warned analysts at TD Securities.
Another weekly gain
The EUR/GBP is about to post the eighth weekly gains in a row. Initially, it was a hawkish European Central Bank and now is a weak pound that is driving the cross to the upside. The weekly close is set to be the highest since January 2020. The 0.8900/10 area is a strong resistance and a consolidation above could point to more gains even amid overbought conditions. No signs of stabilization or correction are seen at the moment.
EUR/USD drops below 0.9750 after upbeat US PMI data
Following a brief consolidation period, EUR/USD came under bearish pressure and dropped below 0.9750 during the American session on Friday. Better than expected Manufacturing and Services PMI figures from the US provided a boost to the dollar, further weighing on the pair.
After having recovered toward 1.1100 earlier in the day, GBP/USD turned south in the American session and touched its lowest level since 1985 below 1.0900. The PMI data from the US showed that the private sector activity recovered in September, fueling another leg higher in DXY.
Gold falls below $1,650, looks to post weekly losses
Pressured by the renewed dollar strength on upbeat US PMI figures, gold lost its recovery momentum and dropped below $1,650. Meanwhile, the 10-year US T-bond yield is up nearly 1%, forcing XAU/USD to stay on the backfoot heading into the weekend.