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Following the Federal Reserve's decision to hold rates, sterling gained momentum
Yesterday, Federal Reserve policymakers chose to hold interest rates within the 5.25–5.5% range as pressures remain surrounding inflation and the taut US labour market.
Fed chair Jerome Powell pointed out that progress on taming inflation had stagnated but that it was on track to reach the 2% target.
Since the announcement, sterling has gained almost half a per cent against the US dollar as markets expect US rate cuts to be delayed until the end of the year.
The latest figures for the number of job openings in the US, commonly known as JOLTs, declined by 325,00 in March 2024, reaching the lowest level since February 2021. The result of 8.488 million was much lower than market forecasts of 8.7 million.
The latest poll of factory purchasing managers from S&P Global revealed that UK manufacturing slipped back into contraction in April as output and new orders declined as cost pressures remained. The reading dropped to 49.1, down from March’s 20-month high of 50.3. Any reading below 50 signals a contraction.
In the UK, house prices fell unexpectedly for the second month in a row according to building society Nationwide’s monthly index. The average house price in April was £261,962 – down 0.4% on March. The average UK home is now worth around £11,700 less than it was in August 2022, just weeks before then-prime minister Liz Truss’s devastating mini budget.
The London stock exchange is set to lose another high-profile company as shareholders in Paddy Power owner, Flutter, backed a proposal to move the business’ primary listing to New York. Investors voted on the matter on Wednesday and 98% were in favour of the move.
Today is relatively light in terms of economic data. This morning, investors heard that Japanese consumer morale fell to a three-month low of 38.3 in April from 39.5 in March, which was the highest reading since April 2019. Later today we’ll receive the latest on the Canadian economy.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
GBP: Pound remains vulnerable following Fed decision
Following the Federal Reserve’s decision to keep US interest rates unchanged, the pound remains vulnerable as investors expect speculation for Bank of England rate cuts to follow. Current market speculation suggests the BoE could cut borrowing costs in the June or August meetings.
GBP/USD: the past year
EUR: Unemployment figures on Friday
Tomorrow, investors will receive the euro area unemployment rate for March, which is forecast to match January and February’s figures of 6.5% – close to a record low for the area.
GBP/EUR: the past year
USD: Factory activity unexpectedly contracts
The ISM poll of manufacturing purchasing managers in the US fell to 49.2 in April from 50.3 in March, which marked the first industry expansion for 6 months. New orders fell into contraction as did the backlog of orders, while production was maintained at 51.3.
EUR/USD: the past year
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