The Fed voted to hold interest rates last night, as was largely expected. The Fed continues to keep an eye on global economic and financial developments, but still expects to raise interest rates at gradual pace.
While there had been some speculation of a rate hike as soon as March, the probability of a March increase has lessened following the recent increase in global volatility, although it remains an option.
The RBNZ joined the BOC in voting to hold interest rates steady but leaving the door open for further easing if needed.
Today’s releases include preliminary German CPI, Preliminary Q4 UK GDP, and US Core Durable Goods Orders, Unemployment Claims, and Pending Home Sales m/m. Tomorrow’s releases include GDP figures from both the US and Canada.
GBP/EUR: Currently trading at 1.3060
The pound weakened against the euro yesterday, dropping into the 1.30 range before recovering above the 1.31 mark later in the afternoon. There were no major economic releases for the pairing. The euro has received support as a haven currency amidst global financial market volatility, while softer data and Brexit concerns have weighed on the pound.
Today’s releases include a lower-than-expected Spanish Unemployment Rate, Preliminary German CPI, forecast to fall 0.8%, and the UK’s Preliminary Q4 GDP, forecast to accelerate to 0.5% from 0.4% in Q3. A positive release could offer the pound some support this morning, either strengthening the rate or maintaining it around current levels.
GBP/USD: Currently trading at 1.4264
The dollar fluctuated against the pound ahead of the Fed meeting, receiving support in the afternoon from an increase in New Home Sales to an annualised 544K. The Fed’s decision to hold interest rates had little impact on the rate overnight, which held in the 1.42 range.
An increase in the UK’s GDP growth in Q4 may offer the pound some support this morning, while mixed US data, including a forecast dip in Durable Goods Orders and Unemployment Claims, are expected in the afternoon. As a result, the rate may remain around current levels or strengthen slightly in the pound’s favour. A disappointing UK release or strong US data would likely instead weaken the rate.
