The US Federal Reserve’s latest meeting minutes released
Thursday 26 May, 2022
Daily Currency UpdateWith news over Partygate showing no signs of abating, yesterday saw the release of Sue Gray's report on the various lockdown parties taking place. UK Chancellor, Rishi Sunak, has decided to scrap plans for a “rebate and clawback scheme” that would have given people a £200 discount on their energy bills from October. Instead, the loan has been converted into a grant to be distributed by energy companies, with no requirement for people to pay the money back. Two government sources said that the value of the discount could be increased to as much as £400, which would cost the UK Treasury more than £10 billion.
With little data to impact the pound today, this news could send some shivers through the pound. At a time when growth is sluggish in the UK, increased costs to Treasury isn't necessarily something investors would want to see hitting the UK economy. However, with UK inflation at 40-year highs, there is some expectation that the Bank of England could increase interest rates quickly, which if it materialises, may benefit the pound.
Key MoversAll eyes were on the FOMC's latest meeting minutes yesterday, which revealed that the US central bank will be sticking to its interest rate hike path of 0.5% in the coming meeting accompanied by no real mention of recession or stagflation risks.
All Federal Reserve members have voted for a 0.5% interest rate hike. However, the minutes highlighted the Federal Reserve's concerns around using monetary policy to restore price stability while also maintaining strong job market conditions. There was also concern raised around when inflation levels would peak. All in all, the US dollar appears to be on the back foot from the minutes, suggesting that the market perceived that the central bank could have been more hawkish (aggressive) about its stance on tightening monetary policy.
In the Eurozone, we saw the German GDP Growth Rate expand 3.8% year on year in Q1 and German consumer confidence improve marginally to -26 for the month of June. In France, the consumer confidence reading came in short of expectations in May at 86 (from April’s 87). This did little to the euro, which is currently being buoyed by speculation that the European Central Bank could soon become more aggressive about increasing interest rates to control their own inflationary concerns.
- GBP/EUR: 1.1710 - 1.1795 ▼
- GBP/USD: 1.2570 - 1.2665 ▲
- GBP/AUD: 1.7685 - 1.7825 ▲
- EUR/USD: 1.0660 - 1.0790 ▲