Markets await key minutes from the Federal Reserve’s November 7th meeting
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Daily Currency Update
There is growing disagreement among ECB council members on the appropriate pace for reducing interest rates. Mario Centeno, head of the Banco de Portugal, advocates for reducing the ECB rate to 2% as a standard course of action. In contrast, ECB Chief Economist Philip Lane and Bundesbank President Joachim Nagel argue for a more cautious and measured approach. The upcoming ECB press conference on December 12th will reveal which perspective gains the upper hand.Meanwhile, Bank of England (BoE) external policy member Swati Dhingra has expressed support for a faster pace of interest rate cuts. She argues that the UK is not an outlier in inflation compared to other advanced economies and highlights that restrictive monetary policy is hampering investment and growth. Despite this, markets anticipate that the BoE will maintain rates at 4.75% in its December meeting.
In the United States, consumer confidence rose to 111.7 in November, up from 109.6 in October. Dana M. Peterson, Chief Economist of the Conference Board, noted that “confidence continued to improve in November, reaching the upper range of levels seen over the past two years.” Positive assessments of the labour market contributed to this boost in overall confidence in the U.S. economy.
Key Movers
The Euro's recent struggles highlight investor concerns over the economic outlook in both Europe and China, as well as uncertainties surrounding trade following the election of President Trump. Weak export demand and declining business sentiment are further exacerbating the situation. While third-quarter GDP showed marginal growth, fourth-quarter stagnation now appears likely, keeping the Euro under pressure as the year-end approaches.The UK’s primary foreign trade relationships—with China, Europe, Canada, and Mexico—raise the possibility that the Trump administration might, for now, prioritise other regions over the UK when considering tariffs. If this holds true, it could provide some support for the Pound. At the same time, recent data suggests that UK inflation remains elevated, which appears to be fueling discussion among MPC council members about the potential timing and scale of future interest rate cuts.
The Federal Reserve’s minutes from its November 7th meeting will be published at 7 PM GMT this evening and are expected to be scrutinized for insights into whether further reductions in borrowing costs will be necessary at the December meeting. Currently, markets are pricing in a 57% probability of an additional 25-basis-point cut. Fed Chair Jerome Powell has reiterated that monetary policy decisions will not be influenced by short-term political considerations.
Expected Ranges
- GBP/USD: 1.2570 - 1.2625 ▲
- GBP/EUR: 1.1975 - 1.2020 ▲
- GBP/AUD: 1.9390 - 1.9440 ▲
- EUR/USD: 1.0475 - 1.0530 ▲