Markets poised ahead of FED and ECB rate decisions

By Matt Boyle

All eyes are focused on the US and European central banks, as the FED today and the ECB tomorrow, release their interest rate decisions and policy statements. Whilst the Pound has been making a slow advance against both the Greenback and the single currency in the past few days, it will be these releases that set the tone for both GBP/USD and GBP/EUR rates in the short-term.

Gains for the Pound have no doubt been aided with data showing UK consumer confidence hit 18 month high during July and a 2 year high for business confidence.

Rates for GBP>USD and GBP>EUR have seen a steady uptick with the latter now sitting within a cent of a 9 month high.

Anyone with a short-term requirement may want to consider securing currency, as we begin to enter an extremely uncertain period. It is thought the FED will raise by 25bp later today and this will be the last hike of what has been the fastest hike-cycle in US history. Tomorrow the ECB is also expected to hike by the same 25bp, although this is less certain with both their interest rate and inflation levels lower. As both global and domestic inflation shows signs of slowing it is thought the Bank of England will make their final hike when they meet in early August.

As we approach what appears to be the winding down of central bank intervention – the main driver of exchange rates over the past 18 months – the markets will begin to position for this and with so many factors to consider it is hard to know what this will look like, and where it will leave exchange rates and in particular the Pound

Should you have an upcoming transfer speak to your consultant today to help avoid this uncertainty, potential risk and an increase in cost to your transfer