Demand for pound fell after Andrew Bailey failed to fulfill his promise regarding monetary policy. At the same time, the decisions of the US Federal Reserve made dollar much more attractive than its competitor currencies.

In response to criticisms he received during their meeting, Bank of England Governor Andrew Bailey said it was not his responsibility to guide financial markets on interest rates. Many became unhappy with this remark, especially since around summer he hinted at rate hikes by November. But yesterday, the central bank kept interest rates at the same levels and did not make any changes to the volume of bond purchases.

Many also anticipated an increase in borrowing costs from 0.1% to 0.25%, which was why commercial banks like Barclays, NatWest and Lloyds Banking closed their cheapest mortgage lines before a decision was made. This directly hit household lending.

Meanwhile, inflation reportedly rose to 5%, which is twice the target of the Bank of England. Bonds also rallied, with yields falling to their lowest level since Brexit. Bailey said this decline could lead to increased inflationary pressures. He also noted that his past remarks on the imminent rise in interest rates were too exaggerated.

All this made people dub Bailey as "unreliable", similar to what happened with former governor Mark Carney, when he announced a rate hike and later changed his mind.

US labor market

A report on US employment will be released later in the afternoon, where many expect to see a 450,000 increase in workers. The two previous reports have disappointed everyone as they indicated continuous decline. Accordingly, wages soared to record levels in the past quarter, marking the highest rate since 1991. If wages continue to increase, material and transportation costs will rise, which will force businesses to ramp up prices. This can lead to a vicious cycle, especially since the inflationary erosion of purchasing power also stimulates demand for higher wages.

Fed chief Jerome Powell also noted that if wages continue to significantly affect inflation, employers will be forced to raise prices. Also, if wage growth does not slow down despite the situation on the labor market stabilizing, the Fed will have to start raising rates as early as June next year.

In response to this, US President Joe Biden asked companies to conduct more active vaccination against Covid-19. Businesses with 100 or more employees will need to vaccinate or regularly test for Covid-19. The deadline for the implementation of these requirements is January 4 of next year. Failure to do so could result in a fine of up to $ 136,000.

Although this move could protect over 84 million US workers, experts say it may have an undesirable side effect. Workers who oppose vaccinations may leave their jobs, which will be another blow to companies that are struggling to find employees.

In the Euro area, activity in the service sector reportedly grew at the slowest pace in October. Supply chain problems are the key factor that dragged the index down to 54.6 points. Both Germany and France posted declines to nine-month low, while Spain reported the slowest growth in seven months. Italy also recorded a massive drop.

Technical analysis for EUR/USD

A lot depends on 1.1560 because a breakout could provoke a rise to 1.1590 and 1.1615. Meanwhile, a drop below the level will result in a drop to 1.1530, and then a further plunge to 1.1490 and 1.1450 areas.