The Federal Open Market Committee met yesterday and took a surprising shift in tone. Previously very dovish and vowing to keep rates low throughout a number of years to support the US economy in the road to recovery from the Covid pandemic, the shift in stance swept through currency markets. GBPUSD has been trading within a range north of the 1.40 mark since the start of May and dropped near 0.75% after the announcement. EURUSD saw a worse sell off, with the rate sinking and settling below 1.20 and hitting a two-month low. At the time of writing, the selloff has totalled over 1.4%. Of course, however, the shift in stance and actions being taken fully depends on the US economy continues to report positive data over the coming months. Whilst no immediate changes are expected, tapering of policy will be brought forward into 2021.
This morning we saw Eurozone inflation data released. The euro has been under selling pressure and has seen sterling able to make headwind towards the 1.17 mark. Passing just through the mark but not holding, the releases due in could give direction for the course of the day. The single currency has not been supported, with ECB chief Christine Lagarde saying support will remain in place until there are “clear signs of a solid and sustainable economic recovery”.
Have a great day.
Jack Nicholls, Relationship Manager.
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