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  • richard evans

Fed rate cut thinking pushes USD towards recent lows

Good morning

Steadily getting better, now just feel as though I’ve had a few rounds with Mike Tyson both in terms of fatigue and aches. You’d be surprised at the number of people who have contacted me saying they, or someone they know, have had the same of similar.

So, a weaker US dollar was the general theme yesterday, helped by some dovish comments from Feds Bostic who said inflation is coming down faster than expected, while unemployment was staying at much lower levels than he’d have thought given the inflation reduction. He suggests that while rates still need to be restrictive, lower rates will be appropriate and sees two rate cuts through 2024. This is still less than market predictions. I see BoA are actually looking at March for the first Fed rate cut, earlier than many.

GBP has benefitted from the lower USD, GBPUSD traded up to test last weeks highs, reaching 1.2765, since slipping back a few points to 1.2735. We seem to have clear 1.2610-1.2770 range emerging. EURUSD did its best to push higher, hitting 1.0980 yesterday, now back at 1.0950 which leaves GBPEUR 1.1630. USDJPY slipped in line with the weaker USD, trading to 143.50 although is back to 144.00 as I type.

With limited economic releases today it is possible we’ll have a steady day in the currency markets. Key question for me now is which level we see first in GBPUSD, 1.2500 or 1.3000. As usual this will be more down to USD fortunes than anything GBP specific. The pressure does seem to be more on the upside, particularly if we are to see more Fed rate cut talk. But 1.30? That still seems a long way off.

Fortunately, the majority of our currency programs are less reliant on which way the markets move and more on building a sensible, safe and low-risk policy which takes much of the headache of managing currency exposures out of the hands of our clients and into our, shall we say, more experienced hands. I’ll be offering more insight into our offerings as we move through early 2024.

A flurry of snow akin to a blizzard yesterday got me a bit excited that we may wake up this morning to a blanket of snow. It wasn’t to be although I do know that some areas such as Kent have experienced just that. Its colder for sure, so wrap up warm.

- 10.00 EU unemployment

- 00.30 AUS CPI

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