The DXY Index hovers around 104.50 at the start of today’s session after lowering by 0.7% during Thursday and losing a portion of its weekly gains.
Following a couple of days of volatile action, financial markets have calmed down and are digesting the recent Fed policy announcement. As expected, the Fed cut by 25 bps to reach a range of 4.5-4.75%.
During the post-meeting press conference, Fed Chairman Jerome Powell refrained from sharing any hints of the December meeting, and said that the results of the presidential election would not impact monetary policy in the near term.
University of Michigan Sentiment will be out today, with expectations of 71.0 compared to 70.5 previously.
EURUSD rebounded and gained traction near 1.0800 before trading at 1.0770 this morning as the pair is influenced by US data and events.
Recent events in Germany have placed Europe’s largest economy into a period of uncertainty. Currently, Germany’s three-way coalition made of the SPD, Greens, and FDP has collapsed after three years. This comes after a large dispute involving a multi-billion-euro hole in next year’s budget. We expect Federal elections to be moved forward, and a new government formed during the next year.
GBPUSD gained bullish momentum following the recent BoE announcement and gained about 0.8%. During this morning’s session cable is trading in a narrow range below 1.30.
The Bank of England followed the widely anticipated move of cutting interest rates by 25 bps, lowering rates to 4.75%.
During its policy statement, the BoE revised its forecast for the CPI inflation from 2.4% to 2.7%, after the new budget is expected to boost inflation. Inflation is forecasted to rise by just under 0.5% and peak between mid 2026 and early 2027.
Looking ahead, there is strong sentiment that the BoE will maintain a “gradual approach” to policy easing, balancing the easing of inflation with the government’s new fiscal plan.
