Forex: Dollar consolidates ahead of FOMC Minutes while Pound Volatility Rises

Oct 12, 2022
VOT Research Desk

Market Insights & Analysis

On Wednesday, the volatility of the British pound continued to rise amid conflicting information regarding the Bank of England’s (BoE) emergency bond-buying program. After a five-day winning streak,

 the dollar consolidates its gains, keeping the US Dollar Index in negative territory. The September Producer Price Index (PPI) data will be included in the US economic docket. The minutes of the Federal Reserve’s September meeting will be made available in late American session.

While speaking at an event in Washington, BoE Governor Andrew Bailey reminded pension fund managers that they have three days, until the end of the week, to finish rebalancing their positions when the emergency bond-buying program concludes. The speech that Europe’s Central Bank President Christine Lagarde is scheduled to deliver will be closely watched by market participants. However, according to the Financial Times, the BoE indicated to bankers that it might extend the bond-buying program during Asian trading hours. On Tuesday, the yield on the 2-year UK gilt fell nearly 4%, but it is already up 2% on Wednesday.

After a 0.1% increase in July, the UK’s Office for National Statistics reported that the monthly Gross Domestic Product decreased by 0.3 percent in August. Manufacturing Production and Industrial Production both saw declines of 1.8% and 1.6% during the same time frame.GBP/USD spiked above 1.1050 on BoE headlines, but retreated to the 1.1000 area in the European morning after having fallen toward 1.0900 earlier in the day.

In the meantime, in the early European session, US stock index futures are up between 0.7% and 1.1%, indicating that the market is feeling better. Tuesday’s findings from the most recent Survey of Consumer Expectations conducted by the Federal Reserve Bank of New York revealed that consumers’ one-year inflation expectations fell to a new 12-month low of 5.4%, down from 5.7% in the survey conducted in August.

Early on Wednesday, EUR/USD is clinging to modest daily gains above 0.9700.Later in the session, Eurostat will publish the August Industrial Production data.

In the Asian session, USD/JPY reached a new multi-decade high of 146.38, surpassing the level that prompted the Bank of Japan to intervene in late September. The Japanese Chief Cabinet Secretary, Hirokazu Hirokazu, stated that they were closely monitoring FX movements and will take appropriate action, but these remarks did not result in a significant correction. The pair was trading above 146.00 at the time of writing in positive territory.

Gold rose above $1,680 on Tuesday despite falling US Treasury bond yields; however, it did not finish the day in positive territory.XAU/USD rises above $1,670 as a result of the slight selling pressure on the greenback in the middle of the week.

Before erasing a small portion of its losses, Bitcoin extended its slide and fell below $19,000.At the time of press, BTC/USD was trading at $19,150, a slight day-over-day increase. On Tuesday, Ethereum fell to a weekly low of $1,267, but it recovered early on Wednesday to $1,300.

GBP/USD