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The GBP/USD exchange rate experienced a slight rebound on Thursday despite global cautious trading and enduring market volatility. The rate appreciated by 0.4% to $1.2261 after initially dipping. This movement was influenced by the USD's strength against riskier currencies, which was tempered by dovish remarks from Federal Reserve officials.
Policymakers such as Lorie Logan have advocated for a data-driven approach to monetary policy and the maintenance of steady interest rates. However, data from October revealing a slowdown in US employment and manufacturing has suggested that the broader economy is beginning to experience the effects of previous rate hikes. This development has slightly undermined the USD.
The GBP has seen fluctuations due to a lack of substantial UK data and ongoing economic concerns. These concerns were heightened by Bank of England (BoE) Governor Andrew Bailey's warning about potential economic fragmentation, leaving the Pound in a vulnerable position in the absence of positive UK data.
The GBP/EUR rate climbed by 0.3% to €1.1501. This occurred despite no fresh data and the BoE's hawkish stance versus the European Central Bank's (ECB) unchanged rates. Three BoE policymakers backed a rate hike last week while ECB signals no further hikes.
The UK's high inflation at 6.7%, exceeding the eurozone's 2.9%, hints at potential BoE intervention; however, Huw Pill expects inflation to fall without rate hikes. The EUR weakened against the GBP as investors await Christine Lagarde's speech amidst a 0.3% drop in eurozone retail sales and Vice President Luis de Guindos' negative growth outlook.
Significant future events include Lagarde's speech and tomorrow's UK GDP report, which is forecasted to show a 0.1% contraction due to elevated interest rates.
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