- As widely expected, the US Federal Reserve’s FOMC lefts its benchmark interest rate unchanged yesterday in a range of 5.25% to 5.5%, holding off raising interest rates for a second consecutive policy meeting. At his post meeting press conference Chairman Jerome Powell hinted that the committee may now be finished with the most aggressive tightening cycle in decades. “The question we’re asking is; Should we hike more?” adding, “Slowing down is giving us, I think, a better sense of how much more we need to do, if we need to do more.” Equity markets applauded Powell’s dovish pivot with the S&P 500 closing over 1% higher, treasury yields tumbled, and the greenback lost ground against its G10 peers. The announcement came after a softer than expected ADP Private payroll release and a big drop in the ISM Manufacturing Index which fell the most in a year.
- The single currency was able to rally a touch against the greenback however EURUSD is once again struggling to significantly breach the 1.06 area. Downside risk remain in place with support seen around 1.0520 and on the topside 1.0660 remains stubborn resistance. Later today we await the final reading of Eurozone Manufacturing PMI data for October which is expected to come in unchanged at a disappointing 43.0.
- The pound is treading water ahead of the BoE meeting later today, with cable once again hovering around the 1.22 area. The MPC is expected to keep interest rates unchanged at 5.25% for the second consecutive meeting, leaving the benchmark rate at its highest level since 2008. Market speculation suggests that the next move in interest rates will be a cut, but probably not until the second half of next year.
