Recently pound Sterling has found some support against the US Dollar. The currency’s move has been credited to the U-turn option by Chancellor Kwasi Kwarteng on Monday and the market sentiments and expectation of a different directional movement by the Fed. Following market disappointments as to reports on key U.S. economic data (ISM manufacturing PMI and job openings), the markets have lost sentiments toward the currency.
The Reserve Bank of Australia (RBA) surprised the markets with a 25bps rate hike. The central bank’s choice was expected to be a leading indicator for the Fed, which was quickly dispelled by Fed officials yesterday, with hawkish comments from several Fed presidents.
Although the labor markets are still showing signs of cooling from aggressive rate hikes, Fed officials still believe they must work harder to tackle the inflationary problem facing the United States fully. Today’s services PMI data for both the UK and U.S., of which services are the major constituent of respective GDP, might cause the Fed to lower rates and repricing should U.S. PMI miss estimates.
Prime Minister Liz Truss is also in focus in the market as she has traders wondering whether or not she will return the order to the conservative party.