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GBPUSD Sinks 2% In Fed/BoE Aftermath

FOREX
  • The US Dollar surged on Thursday as markets digested a hawkish FOMC press conference and the greenback extended the strong reversal higher from late Wednesday. The expectation of a higher terminal rate for the Fed continues to see pressure on front-end rates, underpinning a significant 1.45% advance for the USD index.
  • The biggest victim to the dollars advance has been GBP. Cable had dropped roughly 150pips in advance of the Bank of England decision/statement and despite delivering a substantial 75bp hike, the lacklustre growth forecasts and rhetoric on rates dampened GBP sentiment further.
  • The pair remains close to the lows at 1.1170 as of writing, down 2% on the session. Having now broken below support at 1.1272, the next target on the downside resides at 1.1061, the October 21 low, before 1.0924, low on Oct 12 and a key short-term support.
  • In a relatively less pronounced move, EUR/USD (-0.62%) is now back below key support at 0.9812 today, which marked the top of the bear channel that was breached last week. A clear break of this support now undermines the recent bullish outlook and signals scope for a deeper pullback.
  • Showing impressive resilience in the face of a firmer USD are both the Mexican peso and the Brazilian Real, with the latter continuing to benefit from the apparent smooth transition occurring following former President Lula’s victory in Sunday’s presidential election.
  • Markets largely consolidated in the hours approaching the APAC crossover in anticipation of tomorrow’s release of October non-farm payrolls. Consensus looks for a payrolls report that would imply only a marginal easing in labor market tightness in October, with supply struggling to recover to pre-pandemic levels and an u/e rate near record lows.
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