Home Daily Commentaries Markets take a moment of pause as the US celebrate Thanksgiving

Markets take a moment of pause as the US celebrate Thanksgiving

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Thursday 28 November, 2024

Daily Currency Update

In Europe it has been four months since the snap elections in France and the country is still in political turmoil. The CAC index of French shares is down 6% this year which is in stark contrast to the US, which is having one of it's best years ever. This is also being reflected in the value of the single currency which is down almost 5.5% vs the US Dollar since Trump was elected. There is also a rising gap between French and German 10 year Government bond yields which are at their widest level since the Eurozone debt crisis in 2012.

In the UK the Bank of England have made clear that they support gradual easing of interest rates and this should drive the Pounds direction as we move toward year end. It is expected that the UK will reduce borrowing costs at a slower pace than that of the ECB and FED and in turn offer investors a better yield and should support the Pounds value.

US inflation edged higher to 2.3% in October vs a print of 2.1% in September. The core PCE Price Index, which excludes volatile food and energy prices, increased modestly also to 2.8% from 2.7% previously and was in line with economist’s estimates. The US Dollar sold off after the neutral inflation print yesterday and today is Thanksgiving in the US with markets closed.

 

Key Movers

The Euro rose almost 1% yesterday, recovering from steep losses, after the ECB's Isabel Schnabel urged caution on reducing borrowing costs too quick in Europe. Several key policy members have recently expressed concern over components of inflationary data which remain elevated. When one combines this with the threat of upcoming tariffs from the Trump administration it is not hard to understand their trepidation.

Deputy Bank of England Governor, Clare Lombardelli, said the MPC ( Monetary Policy Committee ) must see clearer signs of inflation slowing before they reduce rates further. She highlighted that wage growth is stabilising at 3.5% to 4% and CPI data hovering at 3%, both quite a distance from the 2% target which in turn is creating quite a policy conundrum for the UK.

Futures traders now predict a 68.1% chance that the Fed will lower rates by 25 basis points when they meet in December. Inflation data in the US has remained robust which has left markets slightly hawkish on monetary policy and in turn is underpinning the value of the Dollar. All US data is pointing to an economy that is thriving with no recession in sight.

Expected Ranges

  • GBP/USD: 1.2625 - 1.2675 ▲
  • GBP/EUR: 1.1985 - 1.2035 ▲
  • GBP/AUD: 1.9450 - 1.9510 ▲
  • EUR/USD: 1.0505 - 1.0560 ▲

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.

View previous day