- The euro continues to consolidate around 1.0820 after the French election results suggest a more mixed outcome with fewer tail risks associated with a far-right victory. The hung parliament suggests neither block is sufficiently large enough to build a minority government so a broad coalition formation will be needed and with that comes instability and uncertainty around economic policy.
- Federal Reserve Chairman Jerome Powell delivers his semi-annual testimony today and tomorrow amid uncertainty as to when his FOMC colleagues are willing to start cutting interest rates. More than two years after the central bank began hiking rates to curb inflation, the committee continues to be data dependent and unwilling to loosen policy, Officials have opted to keep the Fed funds rate ‘higher for longer’ continuing to be concerned about the return of inflationary pressures. Last month, Fed officials pared back estimates of how many times they expect to lower borrowing costs this year, suggesting they will hold rates at the current two decade high, waiting for inflation to head to the 2% target.
- The pound remains stable, with GBPUSD hovering above 1.28 towards the top of a range that has held for several months. Pressure on the greenback after last week’s US labor market report and maybe some nervous optimism of a new UK government has kept GBPUSD well supported over the past few days. The MPC’s Jonathan Heskel yesterday signalled that he will vote to keep interest rates unchanged at his final policy meeting next month, saying that he needs more evidence that underlying price pressures are receding before backing a cut despite “encouraging signs” on inflation. He was the first MPC member to speak after the end of the election related blackout period, with Chief Economist Huw Pill and fellow rate setter Catherine Mann scheduled to speak tomorrow.
We are using cookies to give you the best experience on our website. Download the GPS Cookies Policy for more information. The main types of cookies we use are as follows: strictly necessary cookies, performance cookies, advertisement cookies, and analytics cookies. You can find out more about which cookies we are using or switch them off in settings. Except for strictly essential cookies, you have also the option to decline the usage of cookies at any time. You can do this through this cookie management panel, which appears when you first visit, and you can access it independently through the link provided at the foot of the page.