Once; Twice; Four times a winner!
The Pound was rewarded overnight by traders in the New York and Asian sessions, pushing the UK’s currency back towards levels not seen for some 20 months. Today’s session initially drew limited support for the Pound given the fresh resistance levels that the UK currency approached overnight. Positively, this afternoon, a headline crossed terminals that Julian Smith, the British government’s enforcer, had informed parliamentarians that the Brexit agreement can be reopened if an agreement is created to produce legally-binding changes to the Irish backstop. The news decreased the headwind that the UK government would face in improving the extant Brexit deal. Base case outcomes were therefore revised upwards slightly, allowing the Pound to enjoy a renewed bid and finish four days out of the five this week comfortably in the Green. The US Dollar has struggled today, losing close to 0.5% on the day. The reason for the fall is the Federal Reserve which comes into focus once again next week. The Reserve will publish its next interest rate decision on Wednesday evening next week with the Reserve widely expected not to raise rates. The pressure on US interest rates in late-cycle economic growth is allowing the Dollar to slide against its international counterparts.
Discussion and Analysis by Charles Porter
Australia With a 25 bp increase in interest rates, the Reserve Bank of Australia took interest rates to an 11 year high of 4.1% and with that increase took the total increase since May 2022 to 4% which is the most aggressive rate tightening cycle ever. This was not expected and consequently had a disproportionate […]
Canadian Curveball Canada was one of the first movers globally to raise interest rates in the face of rising inflation. Whilst much of the rest of the world, including the US, the Eurozone and the UK were still sitting on their hands claiming inflation would be transitory, Canada was busy hiking rates. The nature of […]
US rate cuts Much of the momentum for EURUSD trading above 1.10 only a few weeks ago was built upon expectations of rate cuts by year end at the Federal Reserve. Whilst constantly changing, that view is under threat currently, with markets pricing stickier rate expectations than they previously had been. The Fed is still […]