Market Update

May’s Federal Reserve Interest Rate meeting took place last night, and for a change it was pretty much a non-event in the markets. The Central Bank has again kept Interest Rates on hold at their current levels of 5.5%, this has shown a complete U-turn by officials after initially stating in January that rate cuts were just around the corner. The main contributor to this U-Turn has been the sticky inflation seen rising in The US, seemingly struggling to break the 3.5% mark, and now with this the focus for The Federal Reserve will be on the jobs market.

Expectations now seem to suggest that just the solitary rate cut will take place this year, less than the expected 3 cuts earlier this year as its deemed that higher rates are needed to take money out of the economy and eventually slow the rise in prices. It was evident from comments last night that confidence in inflation falling to 2% is dwindling, and therefore The Central Bank are keen to make it clear that until that confident pathway becomes visible, there will be a reluctance to even consider rate cuts.

Next week see’s the Bank of England’s policy meeting, and like the US are now in a similar position where inflation is becoming stickier than initially thought. The meeting is next Thursday and markets have now pushed back on expectations for a rate cut in May, instead highlighting August as the first rate cut of 2024.

We round the week off tomorrow with the eagerly anticipated Non-Farm Payroll data for The U.S, and as stated yesterday this data set will be scrutinised even more so now in line with inflation before any further decisions on Interest Rate Cuts. The one thing we do now however is that this data release in particular is the most volatile on the market and therefore it could be wise for any USD buyers to make a move before the release.

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