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USD gains on a hawkish FED

GBP - British Pound

The Pound was still well perched at the start of Wednesday trade. Gains were felt across the board with EUR/GBP slipping to its lowest level since April 5th. The Manufacturing PMI data didn’t offer much, posting 53.1 against a forecast of 53.2. With Brexit stockpiling still muddying the manufacturing numbers this was largely brushed aside.

On the subject of Brexit, Theresa May said yesterday she hopes the UK will leave well before the 31st October deadline. Both the U.K. government and the main opposition Labour Party talked up the prospects for a compromise plan and will hold more negotiations in the days ahead. The prime minister is aiming to wrap up the talks next week, either with an agreement or without one. Nothing really we don’t already know but as long we keep hearing talks are progressing well with labour we can probably expect Sterling to be well supported.

All eyes today will be on the BOE rate decision. Much like the FED last night, no change is expected but the attention will be on Carney. Given that the Brexit can has been kicked down the road it will be interesting to see where Carney and Co sit at the moment.

Key Movers

Big news across the pond was the FED's latest rate announcement. As widely expected interest rates were held at 2.5% giving the fact inflation is running below the central banks 2% target. Price action was taken from Powell's rate statement which has been perceived as quite hawkish for the greenback. Outlook for growth is positive for the rest of the year and the view here is with a strong job market and continued growth inflation should return to 2% over time. Comments like these have all but erased the rate cut concern we've all been hearing about. However, whilst no indication was given on the timing of a move in rates it was made clear patience will be needed on future policy changes.
Immediately after the release cable whipsawed and most of the days gains were wiped off the table. Cable touched 2 week highs earlier in the day, testing the 1.31 handle but it wasn’t to be, declining to a low of 1.3037 following the FEDS announcement.

Most of Europe observed May day bank holiday yesterday so nothing from the bloc. EUR/USD held above 1.12 for most of yesterday but cracked below following last nights events, at the time of writing it sits at 1.1193.

Down under the Aussie has received some support. A report by CNBC that suggested that the U.S. and China may announce a trade deal by next Friday. Officials from both sides wrapped up the latest round of negotiations in Beijing on Wednesday. Chinese Vice Premier Liu He will travel to Washington for more talks next week.

The next 2 days we have the opportunity to see how the US employment sector is performing. Unemployment claims today followed on Friday by average earnings, unemployment rate and the non-farms.

Manufacturing PMI for the Euro-zone today, particular attention will be on the German release where for the last 3 months the industry has been in contraction territory.

Expected Ranges

GBP/USD: 1.2950 - 1.3090 ▼

GBP/EUR: 1.1590 - 1.1690 ▲

GBP/AUD: 1.8480 - 1.8650 ▼

GBP/CAD: 1.7420 - 1.7590 ▼

GBP/NZD: 1.9565 - 1.9750 ▲