On Tuesday, the foreign exchange market experienced considerable volatility. Now the British Pound found itself under critical pressure after the surprising UK jobs report was released. The GBP/USD currency pair was last down 0.35% at 1.3130. The US Dollar Index was slightly up and was around 99.70. Perhaps that’s why traders looked forward so keenly to further US economic datapoints.
As the European morning unfolded, most currency pairs showed different levels of movement. As for the USD/JPY pair, it stayed within a consolidation range, holding above the 154.00 mark. Conversely, the NZD/USD displayed a bearish outlook, comfortably trading below the level of 0.5650. The EUR/USD very much lacked conviction, trading choppily in a band of 1.1550.
GBP Under Pressure
The British Pound faced fresh selling pressure late Tuesday, mainly due to the disappointing UK jobs data released earlier in the week. This decline made GBP the weakest currency against the Swiss Franc (CHF), reflecting growing concerns over the UK’s economic stability. The analysts used the job report to signal the increasing headwinds that the Pound was likely to face, seeing it come under heavy selling pressure.
Beyond its fight with CHF over the provisions of CHF, the GBP showed impressive movements against all of the other big currencies. As a result, the USD moved up 0.32% against GBP, a signal of a strengthening dollar in the face of continued uncertainty over British economic indicators. This change would mean more volatility ahead for GBP traders as they adjust to a new chaotic economic climate.
Investors are certainly sending a warning shot across the bow of the UK’s fiscal economic landscape. They are particularly interested in how the Bank of England should respond to these various developments. If bearish sentiment persists, analysts expect additional near-term losses for GBP as the outlook turns increasingly dim.
USD Remains Steady
The US Dollar was little changed. The Dollar Index had modest upside, reaching a high of about 99.70. This calmness follows a period of increased market volatility, as traders wait for key macroeconomic figures released by the United States which could spur further currency fluctuations.
Falling rates kept the USD rangebound against other currencies too. It managed a 0.07% gain against the Euro and a 0.09% improvement against the Japanese Yen. These movements herald dramatic shifts in the global markets, or at least they should be, but not yet. The dollar is holding strong despite the topsy-turvy international marketplaces.
Furthermore, the USD/JPY crossed above 154.00, representing a higher consolidation range, which often suggests a base being established before any longer-term directional moves. Traders are keenly observing this pair as any significant news from Japan or the US could prompt a breakout from its current range.
Commodity and Other Currency Movements
Besides forex movements, commodity prices were an equally important factor driving market dynamics on Tuesday. Meanwhile, gold (XAU/USD) remained firm, trading well above $1,100 and still in the black with a fantastic 3% daily gain. This resilience in gold prices can sometimes be the first sign of a flight to safety among investors when currencies are in turmoil.
New Zealand’s inflation expectations rose to 2.39% for the coming 12 months as we moved into Q4. This surprise hike likely played a huge part on NZD/USD pair as it sunk sharply during European trading hours. The NZD currently trades under 0.5650 as investors digest the threat posed by increasing inflation and what that means for monetary policy going forward.
The EUR/USD pair remains in a tough spot in terms of directionality, keeping to the sideway movement around the 1.1550 mark as of early Tuesday. Market participants are reluctant to take clear positions. They’re looking for further economic signals from each side of the Atlantic before taking big positions in either market.