Although yesterday saw the depreciation of sterling against both the euro and the dollar, as some in the market closed off their riskier pound bets before the US Federal Reserve meeting; today’s trading could see a run back to risk, since the meeting’s outcome didn’t really offer the boat shaking the market expected. Although the Fed noted that they are not looking to accelerate their quantitative easing program, they are set to hold rates at flat for the foreseeable future – perfect conditions for business to borrow cheaply – which would usually push USD down, as funds leave the safety of the dollar for more riskier gambles on stocks.
Back on this side of the Atlantic, the European Council meeting has now been fixed for the 18th, where Brexit will almost certainly make its way back onto the agenda of EU leaders and risk markets. Couple this with the fact that on the same day the pound will have to face a Bank of England meeting, with possible discussion on negative interest rates; it is perfectly conceivable to see that even with the encouragement offered to riskier currencies by the Fed, it may all prove too much for sterling to hold onto.
Whichever side of the price you are on, if you have a transfer including sterling, mark the 18th on your calendar – headline based volatility is guaranteed.
Have a good day.
Author: Joshua Haden-Jones, Senior Relationship Manager
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