GBP/USD Tests 1.1300 After Liz Truss Resigns As PM

Key Insights

• GBP/USD tested the 1.1300 level after Liz Truss resigned as UK Prime Minister. 
• USD/JPY made an attempt to settle above the psychologically important 150 level. 
• USD/CAD declined towards the 1.3700 level amid a broad rebound in commodity markets.

GBP/USD Reacts To Truss’ Resignation

GBP/USD made an attempt to settle above 1.1300 but lost momentum and pulled back towards 1.1250 after Liz Truss said that she was resigning as Prime Minister. She served as UK Prime Minister for just 45 days.

Liz Truss had to reverse her economic policy after UK government bond yields touched new highs on worries about huge government spending. Her successor may be more careful, which could boost investor confidence.

It remains to be seen whether Truss’ resignation will provide significant support to the pound as the UK enters another period of political uncertainty.

From a big picture point of view, GBP/USD was trying to stabilize between 1.1200 and 1.1400 in recent trading sessions. If GBP/USD gets out of this range, it will likely gain significant momentum.

U.S. Dollar Pulls Back Despite Rising Treasury Yields

U.S. Dollar Index failed to settle above the 113 level and declined towards 112.50 despite rising Treasury yields. The yield of 10-year Treasuries has recently tested the 4.18% level before pulling back towards 4.14%.

The Initial Jobless Claims report indicated that 214,000 Americans filed for unemployment benefits in a week, compared to analyst consensus of 230,000. The job market remains in a good shape, so the Fed has enough reasons to raise the rate aggressively.

However, it remains to be seen whether job market data will provide additional support to the American currency in the upcoming trading sessions as it looks that many traders want to take profits off the table after the strong rally.

EUR/USD Rebounds After Yesterday’s Pullback

EUR/USD has recently managed to get back above the 0.9800 level. While traders remain worried about the health of the European economy, these worries have been mostly priced in by the market.

Today, Germany reported that Producer Prices increased by 2.3% month-over-month in September, compared to analyst consensus of 1.3%. On a year-over-year basis, Producer Prices grew by 45.8%. These numbers provided some support to the European currency as the ECB will be forced to raise rates aggressively in order to fight inflation.

USD/CAD Tested Support At 1.3700

USD/CAD moved towards the 1.3700 level amid a broad rebound in commodity markets. Other commodity-related currencies have also enjoyed support in today’s trading session.

AUD/USD moved towards the 0.6300 level, while NZD/USD rebounded closer to 0.5700. In case the rebound in commodity markets continues, commodity-related currencies will move higher.

USD/JPY Tests The Key 150 Level

USD/JPY has recently made its first attempt to settle above the psychologically important 150 level.

There are no signs of interventions from the BoJ, so another test of the 150 level will likely happen soon. A move above 150 may push USD/JPY towards the 155 level as the policy of the BoJ remains extremely dovish.

The country’s central bank continues to print money in order to push the yield of 10-year government bonds below the 0.25% level, which is bearish for the yen.

For a look at all of today’s economic events, check out our economic calendar.