Fed Chair Powell Hints At Rate Cuts

5th June 2019 Market Update

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🇬🇧 GBP –  Sterling recovered slightly yesterday following its recent drops against the euro and dollar. This was despite construction PMI being released below market expectations at 48.6. Sterling did not strengthen due to its own merits though. It appeared to bounce back slightly as the Fed signaled it could cut interest rates to maintain growth and inflation came out below expectations in Europe. Today services PMI is being released from the UK. This is expected to creep up on the last reading.

🇪🇺 EUR – CPI and core CPI both were both released below market expectations from Europe. CPI came in 1.2% and core CPI at 0.8%. The previous readings had respectively been 1.2% and 0.8%. Spain continued to perform relatively well with a reduction in unemployment, and the overall European unemployment rate dropped to 7.6%. The inflation data remained in the spotlight, with the euro weakening over the course of yesterday slightly against sterling. Tomorrow services is also being released from Europe, in the build up to Thursday when the ECB’s next interest rate decision takes place.

🇺🇸 USD –  There was no data of note yesterday from the US. Federal Reserve Chairman Powell spoke in the afternoon though and did stress his willingness to loosen monetary policy if sustained trade tensions hit the US economy, stating that the bank would “act as appropriate to sustain the expansion”. In response safe bonds strengthened, and the US stock market dropped slightly.

ADP non-farm employment figures out this afternoon, and they act as a precursor to Friday’s non-farm employment change. ISM non-manufacturing PMI is being released this afternoon and is generally expected to improve on last month’s reading.

 

Summary:

GBP: Sterling recovers slightly despite weak construction data
EUR: The euro remains firm despite worse than expected CPI
USD: Powell signals rate cut to maintain economic growth


 

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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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