City of London

Carney Holds Rates In His Final Meeting

31st January 2020 Market Update

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🇬🇧 GBP – The key headline yesterday was of course from the Bank of England, who left the interest rate on hold at 0.75%. The votes came in at 7-2 although it was expected to come in at 6-3. This boosted the pound higher and now trades over 1.31 against the USD. Concerns that the Bank of England could suddenly cut UK interest rates quickly faded after the bank’s policy decision, GBP/EUR experienced a rebound in demand also. Much of the Pound’s recent weakness was due to speculation of an imminent BoE rate cut, but a cut even in March has been priced out in favour of a September 25 Bps cut.

🇪🇺 EUR – The Euro traded flat against the USD amongst a mixed set of data. Consumer priced was lower than previous, adding to inflationary woes for the bloc who are consistently failing to progress towards their 2% target. The business climate indicator also dipped from expected, showing that business leaders are less optimistic about future conditions than the market expected.

The pound rallied against most currencies yesterday including the Euro, reaching over 1.19 for the first time since December 17th.

🇺🇸 USD – It was a lacklustre day in the market yesterday for the USD, as the little data that came out was in line with expectations. The dollar index .DXY had gained 0.65% in the last two weeks as investor sold off risk assets, however Coronavirus fears have persisted, with the World Health Organization declaring the epidemic a public health emergency of international concern. This ended the currencies rally on safe haven demand and helped GBP to push over 1.31.

 

Summary:

GBP: More optimism than expect from the central bank puts sterling on the front foot
EUR: Optimism in the Eurozone shrinks among a lack of other data
USD: GDP stays flat in the US – while initial jobless claims begin to creep up

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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