After an intense week of both political and economic factors causing volatility to markets. First seeing the results on Wednesday of the US election – being a driver to rally the USD against its peers. USD was up 2% at one point in a 24-hour window against the EUR. Even if its two months until the Presidential change in the US and no changes can take place yet when it comes to fiscal policies – we can still expect market effects from press conferences from Donald Trump indicating what the next steps will be for the US economy.
Yesterday highlighted another economic policy which has been the main influence to market fluctuations, monetary policies (interest rate decisions). Bank of England and the Federal Reserve both had their meetings yesterday, there was no surprises to the market – both decided to lower interest rates by 25 basis points to a base rate of 4.75%. Even if the outcome was the same from their policy decisions, we could see different approaches from the press conference taking place afterwards. GBP took advantages in the Thursday afternoon session after a more hawkish outlook from the central bank. We could see that the voting was in favour of 8 to 1 on lowering borrowing costs. In the comments from Bank of England they indicated that they don’t want to now cut interest rates at a too quick pace. Markets suggest it’s looking to become a quarterly event and that the next cut can take place in February 2025. GBP stabilised against its short-term losses against the USD, reaching the 1.30 area shortly before falling off into the mid 1.29 mark. GBP/EUR regained its levels above the 1.20 mark – currently sitting at 1.2020.
The Federal Reserve on the other hand, did not indicate that interest rates are coming down too quickly – stating that they will be data driven in the upcoming six weeks to track the performance on the job market and their inflation levels. Jerome Powell did not rule out another rate cut of 25 basis points in December, which saw USD momentum come to a halt against the EUR and GBP.
The negative effected currency this week has been the EUR, with concerns for upcoming US tariffs being placed and other changes from Donald Trump, some suggest that ECB might try to front load a quicker pace of lower their interest levels before he becomes the President of the United States again. Perhaps we did see an indication yesterday when Sverige’s Riksbank (the central bank of Sweden) cut their interest levels by 50 basis points, compared to its forecasted of 25 – it’s the first time in 10 years that the Swedish central bank has double cut.
GBP/EUR 1.2012 GBP/USD 1.2955 GBP/AED 4.7606
GBP/AUD 1.9497 GBP/CHF 1.1292 GBP/CAD 1.7989
GBP/NZD 2.1558 EUR/USD 1.0774 GBP/ZAR 22.6167