Sterling maintains gains

Daily Currency Update

UK GDP data on Friday continues to support the British Pound into this week. A better-than-expected GDP number for July-September, which showed a contraction of just -0.2% when markets were expecting -0.5%, has dampened the belief of a deeper recession. The news followed Thursday’s US inflation data where US consumer prices rose less than expected in October, lifting hopes that the Federal Reserve will slow its aggressive monetary tightening campaign. Fed Governor Christopher Waller attempted to rein in this optimism on Sunday, saying the markets shouldn't get carried away over just one data point. However, this was unsuccessful with the pace of rate increases expected to slow as early as the next meeting. GBP/USD touched 1.1850 on Friday but has since traded in and out of 1.1800 since. GBP/EUR had made a break for 1.1500 early on Friday but now trades closer to 1.1400.

There is little macroeconomic data to take into consideration today, but FOMC member Brainard is due to speak about the economic outlook at a Bloomberg news event, in Washington DC at 4:30 pm. After the recent US inflation data, market participants will be looking for sound bites on the nation’s key interest rate.