Today’s Highlights
- US Dollar soars on interest rate cuts
- Sterling bounces back a bit – will it last?
- Bank of England could bring bad news for the Pound
Current Market Overview
US Dollar soars on interest rate cuts
The US Dollar rose to its highest against the Euro for two years and jumped to a two-month high versus the Japanese Yen as the US Federal Reserve cut interest rates by 25 basis points, in an aim to protect the US economy from global economic shocks and the potential impact of trade tensions. Wednesday’s monetary policy move was expected by the markets, but Federal Reserve Chairman, Jerome Powell, ruled out continued rate changes following this, the first cut in US interest rates post-financial crisis. Market commentators and analysts expect another rate cut this year, but Powell’s comments suggest there will no be further rate drops in 2020.
Sterling bounces back a bit – will it last?
Conversely, Sterling bounced back above $1.22 on Wednesday 31st August after four days of falls, enjoying respite from the lowest level in two and a half years earlier in the week. This was thanks to some better month-end economic data. Markets think this boost for the Pound will be short-lived, however, especially if the days ahead show signs of rising odds of Britain crashing out of the European Union without any transition arrangements in place.
Bank of England could bring bad news for the Pound
This afternoon brings the Bank of England (BoE) rate setting meeting and the quarterly inflation report. The UK central bank is unlikely to make any changes in policy, however, traders will scrutinise any changes to growth forecasts, bearing in mind change in rhetoric from UK Prime Minister, Boris Johnson, who seems determined to leave the EU on the 31st October. The BoE has previously stated that interest rates were more likely to rise than fall, but that was assuming that a withdrawal agreement could be reached with the EU. If the bank changes its stance, Sterling could lose further ground. Mr Carney’s press conferences often put the Pound under pressure, so today’s announcements will be watched with interest.
