Market Update
- Posted by currencies in Bank of England, Currency, Dollar, Economy, EUR, Fed, GBP, Inflation, Rate Cuts, Rate Hikes, Sterling, UK, Uncategorised
- December 14, 2023
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The US Dollar is now at a 4-month low against its major peers after The Federal Reserve finally signalled the path towards Interest Rate cuts next year. Federal Reserve Chair Jerome Powell failed to push back against rate cut expectations, saying the discussion if cuts in borrowing costs is coming into view. Markets are now pricing in a 75% chance of a rate cut in March, up from 54% just a week earlier.
Off the back of this, we’ve seen GBP/USD soar from 1.2510 to 1.2655 as of writing. EUR/USD also shot up from high 1.07’s to this morning’s high of 1.0914.
Attention now turns to this afternoon, but keeping with Central Bank meetings we have the Bank of England at midday and The European Central Bank just over an hour later. Keeping in line with The Federal Reserve, both The Bank of England & European Central Bank are set to keep their rates on hold but more importantly it’ll be the forward guidance provided which will impact the exchange rates.
If in contrast to The Federal Reserve, both central banks push back against any potential rate cuts in 2024, we would expect to see both GBP/USD & EUR/USD strengthen even further. Potentially seeing both rates climb towards 1.27 and 1.10 respectively. Any commentary taking an opposite view would of course unfortunately see both sets of rates lose some of their gains against The USD.
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