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  • richard evans

Fed raises rates 25bps, attention turns to ECB

Good morning


Welcome to Star Wars day, May the 4th be with you....yes I know its childish but still puts a smile on my face!


FOMC did raise rates by 25bps to 5.25% as widely expected but signalled a potential end to this tightening cycle, despite Powell confirming the persistence of inflationary measures. He made it clear the Fed need to assess the impact of tightening to date and the line in the statement saying ‘additional firming is needed’ was removed. The signal to pause is not set in stone, more of a suggestion at the moment, but there is a strong chance this could be the last rate rise for some time, perhaps the next move by the Fed could even be a rate cut. Let’s not get carried away.


Markets didn’t quite know where to go, GBPUSD and EURUSD pushed higher initially to 1.2590 and 1.1090 before coming off to 1.2535 and 1.1035, but overnight both have pushed higher again to test those post-announcement highs, currently 1.2590 and 1.1070 respectively, leaving GBPEUR around 1.1350. USDJPY is currently 134.50, CITIs Friday expiry 135.00 USDJPY put looking healthy. Yen crosses also lower with GBPJPY 169.00 and EURJPY 149.00.


A strong Aussie trade balance hasn’t done much for AUD with AUDUSD at 0.6675 and GBPAUD 1.8850


PacWest Bancorp looks like the next victim of the banking crisis, its shares fell from $9.00 to $5.30 a couple of days ago, and closed yesterday at $6.40. They were up at almost $30 back in February. Other regional banks remain under pressure following the rescue of First Republic Bank.


Eyes now turn to ECB where a 25bps rise is favoured but a 50bps rise is not out of the question. Inflation in the Eurozone remains high but below the peak last year. As always the press conference will be closely watched for any comment about future rate moves. We’ll likely need a 50bps rise or a hawkish message from Lagarde if EURUSD is to clear the 1.1100 hurdle.


UK local elections today in many areas, quite likely the Tories will get a bit of a hammering. Don’t forget your ID if you are going to vote.



- 09.30 UK S&P composite PMI

- 13.15 ECB rate announcement

- 13.30 US initial jobless claims

- 13.30 CAD merchandise trade

- 13.45 ECB press conference

- 15.00 CAD Ivey PMI

- 02.30 RBA monetary policy statement

- 02.45 China caixin services PMI



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