Good morning,

As expected, the Federal Reserve policy decision has stung the markets with volatility around the time of the event, yet as we open rates have settled in to pretty much where we sat yesterday. This has an all too familiar feeling to the ECB announcement.

A brief summary of the event highlights a quarter cut to 2% as expected, with the obvious pressures of a “weakness in global growth and trade policy” begging for this. Trump remains disappointed with Powell, claiming he has “no guts, no sense, no vision” as his hopes of more than a 0.25% cut were ignored.

The key points on the narrative following were that the Fed remained tentative to commit to further cuts along the cycle, claiming its more of an as and when needed decision process. This leaves an element of uncertainty on the market forecasting for the USD, with expectations of between three and four cuts over the next four meetings less priced in.

On the Brexit radar, although rates seem to support a more positive outlook, with GBPEUR testing 1.13, and GBPUSD clambering to reach 1.25, the underlying sentiment may have a darker tone.

Deadlines have been set for a written proposal in the next 12 days or “it’s over”, whilst Boris Johnson is staying true to his mantra of just getting it done. The squeeze is being felt while we are in the home stretch and the pound will be extremely sensitive to any momentum and developments in the following days.

Today we have UK retail sales at 09:30 with a negative reading expected. This may put the brakes on the recent pound drive we have seen this week, while the Bank of England rate decision at 12:00 is likely to have limited impact since an unchanged policy is expected.

What we have seen the past few weeks around central bank policy is that the markets tend to react erratically with big swings before settling back to the moving trend.

This opens a great opportunity to benefit from the use of firm orders in order to take advantage of the broad fluctuations. Have a discussion with your account manager around price targeting and trading zones to make the most of this advantage.

Have a great day ahead.

Author: Ross Hammond, Senior Corporate Account Manager