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The Federal Reserve cut interest rates and the Bank look set to follow suite.
Wednesday was another rollicking day for stock markets with the Federal Reserve’s second consecutive interest rate cut bringing another burst of optimism. Today also begins with promising news from the trade war. Overnight, Donald Trump claimed a one-year agreement with China had “settled” the rare earth minerals issue.
Interest rates could soon be eased in the United Kingdom, too. Currency markets certainly think so, as the root cause of sterling’s struggles this week has been a dovish repricing of the interest rate outlook. In short, rates are expected to fall faster than many thought, which has caused the pound to drop like a stone by around a cent against both its main rivals since Monday.
While the Fed did agree to another quarter-point cut last night, chair Jerome Powell was at pains to stress an identical decision in December was far from a foregone conclusion. Up to then, financial markets had been betting heavily on another cut before the year is out.
Nvidia, titan of the AI chip universe, became the first ever company to be valued at $5 trillion, just three months after crossing the $4 trillion mark. But peer beyond the hype and current events do feel a little detached from economic reality. How does the furious market rally square with an uncertain inflation outlook, falling consumer confidence, and widespread talk of an AI bubble that could pop at any moment?
Uncertainty over the autumn Budget hasn’t stopped borrowers and lenders navigating the mortgage market. Individual net mortgage borrowing rose to a six-month high of £5.5 billion in September, suggesting demand remains strong amid economic stress.
This morning, the Bank of Japan voted to keep interest rates on hold at 0.5%. Policymakers haven’t opted to hike rates since January, when they were first brought to their highest level since 2008.
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: Sterling’s slide continues
The pound fell to its lowest in months against the US dollar and its lowest in years against the euro across the middle of this week. Two main factors have contributed to this: first, the autumn Budget will be painful and might include tax rises to offset the productivity downgrade. Second, the Bank of England are expected to turn dovish as inflation cools and the growth outlook worsens.
GBP/USD: the past year
EUR: ECB promises less drama
Thursday is decision day for the European Central Bank, but don’t expect as much drama as others have served up. The euro has been stable this week ahead of another expected hold, and even this morning’s busy streak of growth data looks unlikely to change that.
GBP/EUR: the past year
USD: November brings funding cliff edge
The government shutdown has rumbled on for almost a month, but 1 November is the date where the proverbial might really hit the fan. That’s because funding for several key welfare initiatives (including the Snap programme, otherwise known as food stamps) is set to expire and millions of Americans could be hit by massively increased health insurance premiums. We’ll see how much appetite there is for more grandstanding once those changes go through.
EUR/USD: the past year
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