020 7898 0500
All eyes on the Federal Reserve in Washington DC
Federal reserve building at Washington D.C. on a sunny day.
We’re in interest rate season and the US Federal Reserve goes today, with a 25-basis point cut widely expected. Any deviation from that is likely to hit the dollar one way or another.
It follows a stonking US employment report yesterday, with 430,000 new jobs added. With today’s cut generally priced in, all the talk is of who will replace Jerome Powell as chair of the Fed, with final interviews for the job this week.
The Bank of England’s governor Andrew Bailey will also be quizzed today, with the BoE’s own quarter-point rate cut expected next week but still far from baked in. There was further evidence of a slow economy yesterday with the British Retail Consortium (BRC) reporting like-for-like sales rising by just 1.2%, the most sluggish rise for six months.
It’s been a quiet few days for data but that all ramps up over the next week, with GDP, unemployment and inflation for the UK all being released in the run up to the BoE’s interest rate decision.
There is increasing speculation about the future of the prime minister, with one alarming report today about the likely negative effect on sterling of a left-wing replacement such as Angela Rayner, should the situation in the first half of 2026 and the elections in May not develop necessarily to his advantage.
Yesterday 13 Labour MPs voted in support of a Liberal Democrat bill that would require the government to begin negotiations on joining a bespoke customs union with the EU. This is highly unlikely to become law, although it did pass the first stage.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Business Account manager on 020 3918 7255 to get started.
GBP: Sterling drops off the pace
The froth came off the pound’s recent gains yesterday, with roughly 0.5% losses against the Aussie dollar but rather less against the US dollar and euro. The data picture picks up over the week, all leading up to the BoE’s decision a week tomorrow, so expect volatility.
GBP/USD past year
EUR: Mixed picture for euro
There was no coherent picture for the single currency yesterday, as it headed in wildly different directions – a 0.75% gain on the yen and smaller gains on GBP, USD and NOK but in the red against AUD and others. Christine Lagarde will be talking shortly, but will there any guidance on ECB monetary policy?
GBP/EUR past year
USD: Markets wait for Fed decision
Positive data on job openings yesterday failed to impress the currency markets – or at least, not as much as they were concerned at the interest rate cut expected today. We’ll get that decision at 7pm UK time.
USD/GBP past year
For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business account manager on 020 3918 7255 or your Private Client account manager on 020 7898 0541.
