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GBP/USD surges to two-month high

Tuesday, November 21, 2023

Today’s headlines

What’s happening: The GBP/USD forex pair started the week with gains amid weakness in the US dollar.

What happened: The British pound surged to its strongest level in two months, as prospects of higher rate cuts by the Federal Reserve in 2024 weighed on the US dollar.

However, the sterling fell to its weakest level since May against one of its major peers on Monday.

Why it matters: Investors continued monitoring moves by major central banks worldwide to gain more insights into their future monetary policies. There were speculations of the Bank of England lowering interest rates by around 80 basis points (bps) in 2024, compared to speculations of a 60bps cut a week ago.

The BoE is scheduled to hold its next meeting on December 14, during which it is widely expected to keep rates unchanged, especially with inflation in the UK easing to 4.6% in October, from 6.7% in the previous month.

Traders also believe the Fed is done with its rate hike cycle, which exerted pressure on the US dollar and provided support to the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.5% to 103.44 on Monday.

The sterling also received some support from an increase in gilt yields, after UK Prime Minister Rishi Sunak announced plans to reduce taxes in view of easing inflation, ahead of the interim budget update this week. This came as a surprise move, as it followed UK Finance Minister Jeremy Hunt’s remarks over the weekend of not reducing taxes as this may fuel inflation in the country. Yields on benchmark UK 10-year gilts rose to around 4.153%, while US Treasuries increased to 4.478%.

The GBP/USD forex pair climbed around 0.35% at 1.2506 on Monday, after hitting 1.2511 earlier in the session, the highest level since September 13.

However, the EUR/GBP surged to its highest level since early May of 87.70 during Monday’s session. The forex pair ended trading almost flat at 87.51.

What to watch: Investors will focus on Bank of England Governor Bailey’s speech, as he is scheduled to testify before the Parliament’s Treasury Committee later today. Data on labour productivity and public sector net borrowing from the UK, due to be released today, will also remain in focus.

The markets today

Zoom Video Communications will be in focus today, after releasing Q3 results

Context: Shares of Zoom Video Communications rose in after-hours trading on Monday, following the company’s upbeat third-quarter results.

Details: Zoom’s video software had become a major communication tool amid the pandemic. Following the reopening, however, casual customers and small businesses started exiting Zoom and the company shifted its focus on enterprise customers.

Zoom’s enterprise revenues grew by 7.5% year-over-year to $660.6 million in the third quarter. The growing enterprise revenues signalled that the company was able to maintain its foothold in a competitive market. It ended the quarter with around 219,700 enterprise customers, representing 5% year-over-year growth.

Zoom topped market estimates for the 18th consecutive quarter. The company’s total revenues rose 3.2% year-over-year to $1.14 billion, exceeding the consensus estimates of $1.12 billion. Quarterly earnings came in at $1.29 per share, topping Wall Street expectations of $1.08 per share.

Zoom’s operating cash flows surged 67% year-over-year to $493.2 million in the quarter.

“In Q3, revenue came in ahead of guidance as we bolstered Zoom’s all-in-one intelligent collaboration platform with advanced new capabilities like Zoom AI Companion and continued to evolve our customer and employee engagement solutions,” CEO Eric Yuan said during the earnings call.

Management guided to revenues between $1.125 billion and $1.13 billion for the fourth quarter and earnings of $1.13 to $1.15 per share, higher than market expectations of $1.00 per share.

The company expects full-year revenues between $4.506 billion and $4.511 billion and earnings between $4.93 and $4.95 per share, compared to market views of $4.27 per share.

How shares responded: Zoom’s shares gained 0.5% to $66.35 in the extended trading session, following the release of quarterly results. The stock has gained around 8% over the past month.

What to watch: Investors will continue monitoring the addition of enterprise customers in the company’s portfolio. Markets will also watch the progress and adoption of Zoom AI Companion.

Other Markets: European indices closed mixed on Monday, with the CAC 40 and STOXX Europe 600 index up by 0.18% and 0.10%, respectively, and the FTSE 100 and DAX 40 down by 0.11% each.

The news shaping the markets

Fox Corp CEO Lachlan Murdoch travelled to Kyiv and had a meeting with President Volodymyr Zelenskyy. Despite this, the RUB/USD forex pair moved slightly higher this morning.


New Zealand’s trade deficit narrowed to $1.709 billion in October, from $2.315 billion in the year-ago month, lending support to the NZD/USD forex pair.


South Korea’s producer prices rose by 0.8% year-over-year in October, versus a 1.4% rise a month ago, sending the KRW/USD pair higher in forex trading this morning.


Chile’s economy rose 0.6% year-over-year in the third quarter. This followed a 0.8% contraction in the previous three-month period and lent support to the CLP/USD forex pair.


Greece’s current account deficit shrank to €0.404 billion in September, from €0.850 billion in the year-ago month, which sent the EUR/USD pair higher in forex trading this morning.

What else to watch today

European Union’s new passenger car registrations, South Africa’s leading business cycle indicator, Canada’s inflation rate and new home prices, as well as US Chicago Fed national activity index, Redbook index, existing home sales, FOMC minutes and API crude oil stocks change.


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