- After another round of policy meetings yesterday, the Federal Reserve remains the most dovish central bank in the G10. The FOMC have been actively discussing rate cuts while others are hiking, or comfortably on hold or pushing back against early cuts. Markets were further spooked yesterday following the unexpectedly dovish policy meeting, when a strong retail sales report and lower jobless claims print pushed the greenback lower against its peers. The dollar index fell to its lowest level since August, pushing EURUSD briefly above 1.10 and GBPUSD to within a whisker of 1.28.
- The Bank of England held interest rates unchanged yesterday, sticking with its recent message that borrowing costs will remain high for some time. Governor Andrew Bailey said that the central bank is taking a “more cautious” stance than markets, adding that “it’s really too early to start speculating about cutting interest rates.” In a further warning, he said, “I don’t think we can say definitively that interest rates have peaked. I hope we’re at the top of the cycle.” His comments, along with the dollar sell off kept cable supported, however the 1.2750 area remains key with a break to the downside giving bears a potential run at the 50-day MA.
- The ECB also kept rates on hold yesterday, with President Christine Lagarde warning that policymakers must not get complacent following the recent slump in inflation in the euro area. In a further contrast to recent Fed speak, Lagarde confirmed, “We did not discuss rate cuts at all.”
- Ahead this morning we look forward to the release of PMIs from the Eurozone and UK. These are followed by US PMIs this afternoon, along with Empire Manufacturing and Industrial Production data.
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