The US Dollar is firmly up on the back of inflation concerns.
US Initial Jobless Claims drop for the second-consecutive week, at 290K.
GBP/USD: Will finish the year around 1.3800 – Scotiabank.

The British pound extends its slide below 1.3800 during the New York session, losses 0.26%, trading at 1.3788 at the time of writing. As portrayed by US stocks indices rising between 0.19% and 0.58%, the market mood has slightly improved, except for the Dow Jones Industrial, dropping 0.12%.

The US Dollar Index, which measures the greenback’s performance against a basket of six peers, advances firmly 0.17%, currently at 93.722, uplifted by higher US T-bond yields, which rallied on the expectations that high inflation in the country, might force the Federal Reserve to react, hiking interest rates, sooner than later.

Meanwhile, the US 10-year Treasury yield climbs four basis points, sitting at 1.677% at press time.

On the macroeconomic front, in the UK, the Public Sector Net Borrowing for September, at GBP21.014B, was lower than the GBP27.152B expected

On the US economic docket, US data was mixed. Weekly jobless claims have dropped to their lowest levels in 19 months and existing home sales increased 7.0% to 6.29 million in September, the highest reading since January. Contrarily, the Philadelphia Fed Manufacturing survey slid to 23.8 from 30.7 in the previous month.

The FX Analysis team at Scotiabank expects the pair to end the year around 1.3800:

“The GBP remains well supported by hawkish BoE expectations that should prevent sustained declines under 1.36, but we think there is likely more downside than upside risk to market expectations for BoE tightening as already over 100bps in hikes are priced in between now and end-2022.”

“We think the GBP/USD will struggle to make a push toward a test of 1.40 despite the high probability of at least one hike shortly and think it more likely that the pound closes the year near the 1.38 level.”

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