020 7898 0500
The Federal Reserve is expected to cut interest rates on Wednesday evening.
All roads lead to Washington this week ahead of the Federal Reserve’s next interest rate decision. With markets overwhelmingly forecasting a quarter-point cut and the labour market showing signs of stress, the decision (and the commentary that accompanies it) will be a highly significant moment.
The US dollar’s challenging run has allowed the pound to recover some territory. Sterling begins Monday near its best level against both the euro and the US dollar since the end of October, although it too has a potentially dovish interest rate decision to deal with before markets wrap up for Christmas.
Elsewhere, Friday brings UK economic growth data for the UK. GDP is expected to have flatlined in October amid intense uncertainty and weak hiring intentions. An underwhelming result could add fuel to the rate cut fire and lead to weakness for the pound.
Tomorrow’s US JOLTs jobs report for October will be closely watched for any sign of stress. It’s been a strange period for observers of the American economy. Several delayed data points have meant the dollar has been flying blind and despite the consensus forecast of a rate cut, policymakers remain strongly divided in their opinions about monetary policy.
It was welcome back to the US core PCE price index on Friday after a break caused by the recent government shutdown. The Federal Reserve’s preferred measure of inflation held steady at 0.2% in September, in line with market expectations.
And there was big news in Tinseltown to end last week. Streaming giant Netflix announced a whopping $83 billion takeover of Warner Bros Discovery, one of the heavy hitters in the world of cinema and television. Fans of Harry Potter, HBO programming and other crown jewels of the entertainment world may soon find their favourite content available on other platforms after a deal that sent shockwaves through the industry.
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 account manager on 020 3918 7255 to get started.
GBP: A rousing week
Sterling bathed in some much-needed optimism last week, strengthening by over half a cent against the euro and just shy of two cents versus the US dollar. Decent economic data arrived just in time to ride a wave of post-Budget relief, although the possibility of an interest rate cut before Christmas could reverse that trend.
GBP/USD: the past year
EUR: The odd one out
The European Central Bank is expected to announce its fourth consecutive hold at its December meeting. That makes it very much the odd one out of the major rate-setters and gives the euro an opportunity to recoup some value heading into 2026.
GBP/EUR: the past year
USD: Consumers perk up
The dollar stabilised on Friday thanks to solid consumer income and spending metrics as well as a modest increase in inflation. The closely-watched University of Michigan consumer sentiment study also improved from 51 to 53.3. November’s score was however the second-worst in the history of the report.
EUR/USD: the past year
For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business account manager on 020 7898 0500 or your Private Client Account Manager on 020 7898 0541.
