Sterling on track for second weekly profit in row
Sterling fell in European trade on Friday against a basket of major rivals, moving off two-month high against the dollar on profit-taking.
Despite the decline, the pound is still heading for the second weekly profit in a row following strong UK data and after raising the UK minimum wage.
GBP/USD
GBP/USD fell 0.1% to 1.2525, with a session-high at 1.2546, after rising 0.35% yesterday, marking a two-month high at 1.2572 following strong UK data for November.
Weekly Trading
Sterling remains up 0.5% against the dollar so far this week, on track for the second weekly profit in a row.
Strong Data
Recent data showed the UK manufacturing PMI up to 46.7 in November, the best reading in six months, beating estimates of 45, and up from 44.8 in October.
The UK services PMI rose to 50.5 in November, beating estimates of 49.5, and up from 49.5 in October.
Such data showcases the resilience of the UK economy despite aggressive policy tightening by Bank of England in the past two years.
UK Wages
The UK government decided to raise the minimum wage by a pound to 11.44 pounds per hour starting next April, with the rate applied to individuals between 21 and 22 years for the first time.
The government said this is the largest increase ever in living wages, representing a total of increase of 1800 pounds a year for full-time minimum wage workers.
Such a hike could threaten efforts to contain inflation, and might force Bank of England to maintain interest rates at higher rates for an extended duration, underpinning the pound.
Aggressive Remarks
At his Parliamentary testimony this week, Bank of England Governor Andrew Bailey said it's reasonable to maintain interest rates unchanged for some duration.
Several BOE officials expressed the need to maintain tight monetary conditions to battle inflation, while even opening the door for yet another interest rate hike in the future if needed.
Such remarks were aimed against recent market bets that predicted an approaching interest rate cuts in the first half of 2024.
Oil prices decline for second straight session
Global oil prices fell in American trade on Thursday, extending losses for the second straight day and almost touching a four-month trough amid concerns about inventory buildups in the US.
Prices are also pressured by the delay of the OPEC+ ministerial meeting by nearly a week, at which the group is expected to discuss a deepening of current production cuts.
Global Oil Prices
US crude fell 1.3% to $78.79 a barrel, while Brent shed 1.25% to $80.49 a barrel, with a session-high at $81.56.
US crude lost 1.3% on Wednesday, while Brent slid 1.1%, with global oil prices resuming their decline after a three-day hiatus.
US Stocks
The Energy Information Administration just now announced a massive buildup of 8.7 million barrels in US crude stocks in the week ending November 17, the fifth weekly increase in a row, blowing past estimates of a 0.9 million barrels buildup.
According to the data, total US stocks are now up to 448.2 million barrels, the highest since July 21 and a negative sign for demand.
US Production
The EIA also reported no change in US crude stocks, remaining at 13.2 million bpd for the sixth week in a row, already the highest ever in US history.
OPEC+
The OPEC+ coalition issued a statement about delaying its next meeting from November 25 to November 30.
The delay comes as markets closely await a potential decision of extending the ongoing supply cuts and deepening them in 2024, after oil prices tumbled 15% since September.
Three sources told Reuters that OPEC+, which includes Russia, is discussing additional supplies cuts at the November meeting.
Dollar resumes losses near three-month trough
The dollar declined in European trade on Thursday against a basket of major rivals, resuming losses after a two-day hiatus, and almost touching a three-month trough amid renewed pressure on the greenback.
The dollar is hurt by the bearish outlook for US monetary policies with investors now expecting the Fed to wrap up the current cycle of policy tightening.
The Index
The dollar index fell 0.3% to 103.54, with a session-high at 103.86, after closing up 0.3% yesterday, moving off three-month lows at 103.18.
Economic Data
Recent US data showed unemployment claims fell considerably, which is a positive result that nonetheless didn't change the forecast trajectory for US monetary policies.
A University of Michigan survey also showed US consumers inflation expectations rose for another month in November, despite clues that prices haven been slowing down in recent months.
US Rates
Markets are putting a 5% chance for a US interest rate hike at the Federal Reserve December meeting.
Outlook
It's the common view now, that the recently released Fed's minutes did little to change the likely outcome at the December Fed meeting, which is holding interest rates steady and wrapping up policy tightening.