Fed Chair Powell’s Comments Shake Markets
Yesterday afternoon, Federal Reserve Chair Jerome Powell delivered a notably cautious economic outlook, which weighed heavily on US equity markets during the late session. Powell flagged the growing threat of tariffs to the ongoing recovery in US economic growth and warned of potential upward pressure on inflation. His comments suggested a hawkish stance on interest rates, indicating that under current conditions, the Fed could struggle to justify rate cuts if inflation were to tick higher again.
Focus Shifts to the ECB Today
Today’s main event is the European Central Bank’s interest rate decision, with markets already pricing in a 25 basis point cut, bringing the base rate to 2.4%. This move has been well telegraphed, so we don’t anticipate significant market reaction unless the post-decision press conference (scheduled 30 minutes after) offers any unexpected forward guidance. Historically, the ECB has tended to maintain a low-profile communication strategy, especially in periods of geopolitical or economic uncertainty—like the current situation with global tariffs—which makes forward guidance unlikely to be bold or decisive at this stage.
US Jobless Claims in Focus This Afternoon
Later in the session, attention will turn back to the US with the release of initial jobless claims data. The health of the US labour market remains a key indicator for markets and monetary policy direction. Current expectations point to a slight uptick of 2,000 new claims, a marginal move in the wrong direction, but still within a relatively stable range.
GBP/EUR 1.1628 GBP/USD 1.3231 GBP/AED 4.8612
GBP/AUD 2.0829 GBP/CHF 1.0810 GBP/CAD 1.8374
GBP/NZD 2.2326 EUR/USD 1.1366 GBP/ZAR 24.9674