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Market Update

• Posted by currencies in Bank of England, Currency, Dollar, EUR, Fed, GBP, Inflation, Rate Cuts, Rate Hikes, Sterling, UK, Uncategorised
• November 2, 2023
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The Federal Reserve opted to keep Interest Rates at current levels last night, which is a 22-year high as expected. The Central Bank’s Chair Jerome Powell struck a less hawkish tone than the markets were expecting but did leave the door open for one more possible hike. Keeping rates higher for longer seems to be the focus for The Federal Reserve after a few good months of strong economic data is showing signs that inflation is gradually moving towards its target. According to Jerome Powell, there’s still a way to go to bring inflation down to the 2% target, but with inflation still running at 3.7% it may lead to The Central Bank delaying potential Rate Cuts next year.

Focus will now turn to Non-Farm Payroll data in The U.S tomorrow. Any signs of a cooling jobs market will give The Federal Reserve more reason to potentially keep rates at their current levels. Geopolitical events such as The War in The Middle East is also on the Federal Reserve’s minds given the economic risks posed globally.

Keeping with Interest Rates, The Bank of England have their decision later today at Midday. According to Analysts, Pound Sterling is due to win back some ground against The EUR as it looks like The Bank of England has little choice but to warn that interest rates cannot come down for many months, increasing market expectations that the first rate cut by The Central Bank will only come in September of 2024. UK’s September inflation came out at 6.7% Year-On-Year which was above market estimates, mainly as a result of rising fuel prices, comparted to higher inflation figures in The EU, with Euro-Zone CPI Inflation dropping to 2.9% last month.

In summary, I expect the next 24 hours or so to be fairly volatile for GBP with the possible scenario’s from The Bank of England later today and of course as mentioned The Non-Farm Payroll release from The U.S which will no doubt impact The Federal Reserve’s thinking for their next rate decision.