BoE on Tuesday, the Euro and British Pound fell sharply across European trading hours. That decrease was led exclusively by negative inflation news out of the Eurozone and important JOLTS data out of the US. The EUR/USD currency pair fell to just above the 1.1400 level. At the same time, GBP/USD retreated toward 1.3500, highlighting the influence of macro-driven risk appetite and global economic conviction.
In early trading EUR/USD was still around 1.1400, suggesting a sizable drop from the past month or so. In fact, according to traders, the recent high inflation figures trade from Eurozone were a heavy influence on this drop. The gentler prints on inflation led to fears for the region’s economic robustness. Consequently, investors are recalibrating their expectations on how many times the European Central Bank (ECB) will adjust interest rates in the coming months and years.
At the same time, a significant global rebound of the US Dollar proved instrumental in pulling EUR/USD down. After investors shifted their attention to the strength of the USD, the Euro kept weakening against its sterling American rival. The state of the United States labor market came into stark relief with the release of key job openings data. This data stoked fears of new rounds of aggressive Fed monetary tightening.
The GBP/USD currency pair posted a significant drop in early European trading. It was leaning down towards 1.3500 with some light bearish force. The key to the British Pound’s robust performance were the testimonies from Bank of England (BoE) policymakers. In response, traders started to recalibrate their expectations for UK monetary policy given the reality of persistent economic malaise.
As of this writing, both EUR/USD and GBP/USD are tanking. This underscores the fact that global economic indicators are more intertwined than ever and immediately affect currency markets. Tepid inflation data out of the Eurozone stoked fears about growth outlook. At the same time, upbeat employment figures from the US increased bullish sentiment toward the USD.
According to market analysts, traders will be watching each country’s next steps very carefully. Future economic releases, especially inflation prints and labor statistics, will continue to steer market dynamics and currency trends in that direction.