The European Central bank hiked interest rates by 75bps as widely expected by the market. The EUR/USD was trading up close to 1.01 before the rate announcement but has since fallen back below parity. Comments from Christine Lagarde that the Eurozone's economy will worsen have caused the market to scale back on more aggressive rate hikes from the ECB.
US real GDP growth
US real GDP growth for Q3 of 2022 was slightly above expectations at 2.6% versus the expected print of 2.3%. The number that surprised the downside at 4.4% versus the 5.3% expected was headline price index. This is an indicator to measure the prices of goods and services produced in the US, and could indicate that inflation is at its peak. Inherently this poses the question if the Fed will back down on aggressive interest rate hikes.
Rand trading stronger
In line with the general market risk-on sentiment, the rand had a volatile day. In the lead-up to the data releases in the afternoon, we saw USDZAR weaker up to R18.08 but subsequently reverted back to around R17.92. The dollar is a bit of a mixed bag, with the Euro and GBP under pressure, but emerging markets are gaining some traction. All eyes will remain firmly on next week's Fed meeting.
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