- GBPUSD is advancing towards 1.1738 as a decline in US inflation has trimmed hawkish Fed bets.
- Bloodbath in US Treasury yields and cheerful market mood have underpinned risk-sensitive currencies.
- Going forward, the UK GDP data will be of utmost importance.
The GBPUSD pair is advancing firmly to kiss the two-month high at 1.1738 in the early Tokyo session. A significant drop in the US inflationary pressures has infused an adrenaline rush into risk-sensitive assets. Euphoria in the market mood has improved the risk appetite of investors vigorously.
S&P500 soared like there is no tomorrow as mounting price pressures in the US economy have been hammered. A meaningful decline in price growth has trimmed downside risks to economic projections and the risk of a recession situation. Earlier, economists were expecting that continuous policy tightening measures by the Federal Reserve (Fed) would shift the US economy into a recession. And, when the US sneezes, developing countries catch a cold.
Meanwhile, the US dollar index (DXY) nose-dived to 107.80 as every chance of a risk-off impulse in the market was kicked-off. The returns on US government bonds remained a major victim as long-term bonds’ yields have witnessed a bloodbath and have dropped to 3.8%.
The headline Consumer Price Index (CPI) has dropped to 7.7% vs. the projections of 8.0% and the core CPI declined to 6.3% against the expectations of 6.5%. This has paused chatters of a higher terminal rate by the Fed as price pressures have displayed signs of significant exhaustion. Also, rumors of recession and bleak economic outlook may dim as Fed chair Jerome Powell won’t continue the 75 basis points (bps) rate hike cycle.
On Friday, US markets will remain closed on account of Veterans Day.
Talking on the UK front, investors are focusing on the UK Gross Domestic Product (GDP) data, which will release on Friday. The GDP data on an annual basis is seen lower at 2.1% vs. the prior release of 4.4%. And, the quarterly regime is expected to display negative growth by 0.5% against an expansion of 0.2%.
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