USD has shown strength this week, rebounding from two-week lows against the GBP and EUR. Most recent development, seeing US stock markets taking big losses out of fear in the technology sector regarding artificial intelligence, saw stocks plummeting. A sell-off situation has boosted the USD to gain 0.5% against the GBP and 0.65% to the EUR. The release of Deepseek (Chinese based AI company) has created panic and caused a total of a trillion $ loss so far. It will be of most importance to keep an eye for comments and development on the stock markets as they can carry on volatility and most likely continue to cause additional volatility to currency markets.
For this week, its filled with central bank decisions from Canada, US and lastly Europe. First out tomorrow, we have Bank of Canada expected to lower borrowing costs by 25 basis points down to 3%. The Canadian central bank has been one of the more aggressive on lowering interest rates, seeing levels sitting at 5% back in April 2024.
The main talking point for tomorrow, with the development on the US stock market is the approach from the Federal Reserve. Markets have priced in that the Fed will hold interest rates on hold, but seeing recent pressure from the new President Donald Trump that there is a need for US to lower interest rates. The likelihood is that we won’t see a change in their stance for this meeting and hold rates at bay. More interestingly and what will be closely followed is how the Federal Reserve will mention afterwards, if there forward guidance looks differently with more interest rate cuts than initially announced. This could see movements on markets and cause downward pressure on the USD.
Lastly on Thursday, ECB – European Central Bank hold their interest rate decision. Expectations is that ECB will break below the 3% mark and with their cut of 25 basis points reach a base rate level of 2.9%. With the recent development of a slow economic growth, while unemployment is alarmingly high above the 6% mark. We will also see the most recent movement for unemployment rate, looking to be unchanged from its previous figure of 6.3%. Its vital for Europe to find a better transition between their monetary policies to ignite economic activity while also boost job openings.
GBP/EUR 1.1920 GBP/USD 1.2443 GBP/AED 4.5724
GBP/AUD 1.9897 GBP/CHF 1.1268 GBP/CAD 1.7911
GBP/NZD 2.1974 EUR/USD 1.0431 GBP/ZAR 23.2957