The Federal Reserve kept interest rates unchanged for a fifth consecutive meeting which was largely unsurprising. However, the division within the central bank deepens as two Fed Governors voted against this decision which marked the first occasion that a double dissent had taken place since 1993.
Fed Chairman Jerome Powell suggested that the underlying strength in the economy is providing plenty of room to keep interest rates steady until further clarification comes from the economic impact of these trade tariff pressures. The monetary policy members also pointed to the fact that with unemployment low, and labour markets solid, along with elevated inflation that there may not be a current need for further rate cuts.
The Bank of Canada also kept their interest rates on hold at 2.75% with Governor Tiff Macklem citing the reduced risk in trade uncertainty preventing the economy from deteriorating as first feared. Macklem did however state that despite this, the door is still open for future rate cuts if necessary.
Keeping with central banks, The Bank of Japan decided to keep their interest rates at current levels of 0.5% this morning due to persistent rises in food prices ultimately leading to inflationary pressures for the upcoming months. This has opened the door for further rate hikes as they stated they will expect to continue hiking interest rates if the economy and prices move in-line with their expectations.
Turning our attention to this afternoon, it is largely U.S based economic data centred around personal spending and income which across the board looks positive. Both Personal Income and Spending are set to increase by roughly half-a-percent, which if that is the case will only further support The Federal Reserves current stance of keeping interest rates on hold. Keeping it simple, if unemployment is low and the jobs market is solid then a continuation of increased personal spending can allow for higher interest rates, so therefore we could see some more US Dollar strength this afternoon off the back of these releases.
GBP/EUR 1.1562 GBP/USD 1.3234 GBP/AED 4.8635
GBP/AUD 2.0508 GBP/CHF 1.0755 GBP/CAD 1.8319
GBP/NZD 2.2388 EUR/USD 1.1431 GBP/ZAR 23.8856