Last night the Federal Reserve Bank opted to cut interest rates as expected. This was the first interest rate cut from the central bank in over 10-years.

Currency Pair% Change (Month)Difference on £200,000
GBPUSD4.07%$9,869

USD exchange rates remained relatively unchanged immediately after the announcement, although cable (GBP/USD) did lose some of the gains it had made earlier in the day when sterling rose from the almost 28-month interbank rate lows that we saw on Tuesday’s trading session.

The chairman of the Federal Reserve, Jerome Powell stated in the comments after the decision that there are no concrete plans regarding further hikes and that this cut isn’t the beginning of a long line of further cuts as the US economic outlook remains favourable.

US fed cuts interest rates

The decision to cut the rate may be down to global uncertainties, mostly surrounding the trade war talks between the US and China, and not down to a dramatically slowing US economy which is perhaps why the cut was only by 25 basis points and not the 50 basis points that some economists had expected. Jerome Powell was questioned whether the cut was down to pressure from US President Donald Trump, who has appeared to have his own agenda regarding the US interest rate and the hikes seen over the past few years. Powell rejected this suggestion and confirmed that global economic uncertainties were behind the decision.

With last night’s tightening of monetary policy as a kind of insurance policy against another downturn in the US economy, we could see the US economy continue to strengthen which in turn could result in further US dollar strength, perhaps resulting in the GBPUSD rate testing the annual lows we saw earlier this week.

Important US data releases

Later today Initial Jobless Claims along with Manufacturing PMI figures will be released at 1.30pm and 2.45pm along with other data releases which could cause market movement. You may wish to register your interest if you wish to be updated should there be any market spikes.

On Friday, as is always the case with the first Friday of the month, Non-Farm Payroll figures will be released which will provide an overview of the US jobs market. Impressive economic data releases out of the US after last nights rate cut could result in a boost to the greenback’s value.

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