The pound is dropping velocity against the dollar, but EUR/GBP volatility remains
Cable fell further 0.4% to 1.235 during yesterday's session, confirming that the pound's advance versus the dollar in January may have peaked around the 1.240 price point.
For the time being, the pair has remained at 1.235, with a spinning-top candlestick pattern indicating a general atmosphere of hesitation among traders ahead of the UK, EU, and US central bank interest rate announcements due for the next two days.
Even though a dovish 25-basis-point (bps) rise from the Federal Reserve is widely predicted, the dollar seems well supported this week, with the US Dollar Index (DXY) rising 0.35% to 101.86 yesterday and rising further to 101.88 in this morning's opening hours.
One immediate consequence of the rate-hike cycle in the United States has been a dramatic increase in overnight federal funds borrowing as deposit withdrawals force banks to seek liquidity from other sources.
According to Bloomberg, the daily government funds borrowing reached a seven-year high of US$120 billion on January 27.
EUR/USD fell from an intraday high of 1.091 to conclude Monday 0.2% down at 1.084, with more losses expected this morning.
EUR/GBP concluded 0.2% higher at 87.84p on Monday, but traders pushed the pair down 10 pips to 87.74p today, making it the most volatile trading pair right now.
The UK consumer credit borrowing is due later this morning, according to the economic calendar. Spending increased dramatically in November in anticipation of the Christmas season, while December numbers are anticipated to reveal that consumers are beginning to reign down their spending.
Eurozone GDP growth will be revealed later, with year-on-year forecasts pointing to a 40 basis point decrease to 1.8% in the fourth quarter of 2022.