The Federal Reserve’s meeting last night saw them keep their rates unchanged as was expected, however off the back of the meeting we saw the Dollar have its worst day in 4 weeks. A few reasons contributed to this, the first being those markets earlier in the week had started to price in a 38% chance of a rate hike so there has been a correction within the markets.
Secondly, the new Federal Reserve Chairman Kevin Warsh has now confirmed an end to any forward guidance when talking about interest rates. In the meeting last night, Warsh confirmed The Federal Reserve would look to keep rates higher-for-longer but stopped from even mentioning any possibility of a rate hike in September. On top of this, markets are now pricing in a September hike at 64%, down from 81% prior to yesterday evenings meeting.
Moving onto today, at the top of the hour we had preliminary German GDP data which has shown positive signs of growth with both Yearly & Quarterly figures strengthening by 0.5% and 0.1% respectively. With Germany contributing 40% to The Euro-Zone’s economic activity, this should be reflected with Euro-Zone preliminary GDP data due at the turn of the hour. Albeit the data is preliminary, it could provide the Euro with a bit of a reprieve.
This afternoon brings the most important release of the day, with The Bank of England’s interest rate decision. Again, it is widely expected that the Bank of England keep rates unchanged at 3.75% but the key to any exchange rate movement will be a combination of the member vote split and the press conference after the event. The last rate meeting saw a vote split of 7-2 in favour of keeping rates unchanged, if this gap was to narrow in favour of rate hikes, then we can expect to see The pound strengthen across the board.
GBP/EUR 1.1651 GBP/USD 1.3345 GBP/AED 4.9034
GBP/AUD 1.9180 GBP/CHF 1.0890 GBP/CAD 1.8761
GBP/NZD 2.2940 EUR/USD 1.1438 GBP/ZAR 22.2094