Home Daily Commentaries Trump criticizes Federal Reserve calls for lower US interest rates

Trump criticizes Federal Reserve calls for lower US interest rates

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.

| Friday 21 March, 2025

Daily Currency Update

The European Union is planning a joint push to raise defence spending by €800 billion as it seeks to protect the region and support Ukraine amid signals from the US that it plans to dial down its military backing. ECB President, Christine Lagarde, recently played down the likelihood of the ECB playing a direct role in the financing effort, saying this is not the purpose of the ECB. The anticipated surge in borrowing has sent bond yields higher across most of European countries.

The Bank of England kept interest rates unchanged yesterday at 4.5% despite fresh data from the Office for National Statistics showing the UK economy unexpectedly suffered a negative growth January. The MPC council voted by an 8-1 margin to keep rates unchanged implying that there was a near complete consensus and this will be front of mind when traders consider how many, if any, rate cuts will be conducted by the BoE this year. This comes as the rate of inflation in the UK is fully 1% above their target rate of 2%.

US data released yesterday showed jobless claims are holding steady and there was an unexpected, but welcome, rise in existing home sales which helped calm fears that the US economy is softening, despite the Federal Reserve’s lowered economic projections released earlier this week. It seems clear after the Fed meeting this week that Central Banks are turning much more cautious on reducing borrowing costs as uncertainly in global economics' and politics grows.

 

Key Movers

Europe’s dependence on American payment providers leaves it open to economic coercion, European Central Bank chief economist, Philip Lane said yesterday, outlining a key risk in the deteriorating relationship between the US and Europe. Lane said that Europe’s reliance on US payment providers like Visa, Mastercard, Google pay have reached striking levels. Adding, “this dependence exposes Europe to risks of economic pressure and has implications for our strategic autonomy, limiting our ability to control critical aspects of our financial infrastructure.”

In the UK Bond investors will be watching the Governments Spring statement next week to ensure Ms. Reeves is sticking to their new fiscal rules. Pressure is growing on the UK to take corrective action to cut spending further and possibly announce new tax raising measures to fill the hole in public finances. Some economists have iterated that falling UK GDP is one of the key reasons the BoE should cut rates more aggressively.

The US Federal Reserve are correct to feel cautious as the Trump administration has instituted a playbook that no one can understand and as such are all Central Banks are playing defence. The Federal Reserve added that “rising political tensions and trade uncertainties could lead to rapid changes in risk aversion, which could disrupt international portfolio flows. Risks must be mitigated at this time”.

 

 

Expected Ranges

  • GBP/USD: 1.2920 - 1.2970 ▲
  • GBP/EUR: 1.1915 - 1.1965 ▲
  • GBP/AUD: 2.0530 - 2.0580 ▲
  • EUR/USD: 1.0815 - 1.0865 ▲

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.