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Federal Reserve and Bank of England Navigate Inflation Challenges: Impact on USD and GBP Exchange Rates The global forex market is currently focused on critical monetary policy decisions and inflation developments in both the United States and the United Kingdom. The Federal Reserve is expected to deliver a 25-basis-point rate cut while potentially scaling back guidance for future rate cuts, which could help maintain the US dollar's strength through year-end. In the UK, inflation has risen to 2.6% in November, its highest level since March, driven by increased costs in petrol, food, and tobacco duty. Core inflation climbed to 3.5% year-over-year, while services inflation remained persistently high at 5%. This inflation data, combined with strong wage growth, has reinforced expectations that the Bank of England (BoE) will maintain its current rate of 4.75% at its upcoming meeting. The market dynamics show different trajectories for major currencies: - The US dollar (DXY) is expected to remain firm around 107.0 into the Christmas period, supported by favorable interest rate differentials - EUR/USD continues to hover around 1.050, with a negative bias heading into the new year - GBP/USD is showing minimal movement, trading around 1.2679, as markets digest the latest inflation data The Federal Reserve's decision is highly anticipated, with markets pricing in a quarter-point cut at nearly 100% probability. Investors will be particularly interested in the updated economic and interest rate projections, especially considering the upcoming transition to Trump's second term, which adds uncertainty to the policy outlook. The Bank of England faces a delicate balance, having already implemented two rate cuts since June. While inflation has been largely contained, the central bank will likely want to see clearer evidence of inflation moving towards its 2% target before considering further rate cuts. This cautious approach reflects the ongoing challenges of managing inflation while supporting economic growth in both major economies. Source1: https://lnkd.in/dUnCyxYQ Source2: https://lnkd.in/d6x27QJy #investing  #forexnews  #financialnews  #financialmarket  #federalreserve 

Interest Rate Insight: The Bank of England’s (BOE) latest decision is in! At today’s pivotal meeting, the BOE’s Monetary Policy Committee has maintained the Bank Rate at a steady 5.25%. Despite a slight overshoot in March’s inflation figures to 3.2%, Governor Andrew Bailey remains optimistic, citing strong indicators of inflationary pressures easing, thanks to tighter financial conditions. The Market is split down the middle about a potential rate cut in June, with odds standing at a knife-edge 50-50. However, the scales tip towards an August adjustment, with an 80% likelihood of a 25 basis point cut, and expectations of a total of 50 basis points reduction throughout the year. The global monetary landscape is witnessing a divergence, with the U.S. Federal Reserve postponing rate cuts amidst an inflation uptick, while Europe signals imminent reductions. The BOE is poised to take independent action, potentially initiating cuts later in the year. Governor Bailey’s forthcoming statements and the MPC’s vote split will be scrutinized for clues on the BOE’s direction. With inflation projected to plummet in April due to a significant year-on-year drop in energy prices, the BOE could soon face pressure to normalize policy. As the U.K. grapples with economic headwinds and a recent OECD growth downgrade, the BOE’s maneuvers will be critical. Eyes are on June for the next big move. #BankOfEngland #InterestRates #EconomicOutlook #InflationTrends

💡 Inflation Drops to 2.5% – What Does This Mean? 📉 Good news! UK inflation has dipped to 2.5%, edging closer to the Bank of England’s (BoE) target. 🏦 While it’s not a game-changer, it’s definitely a step in the right direction and may bring some stability to the markets. 📊 Initially, the BoE was expected to make 4 rate cuts in 2024, but this was revised down to 2 cuts. Will this latest data shift their outlook? 🤔 Deputy Governor Sarah Breeden has indicated a cautious approach, emphasising the difficulty in deciding how quickly rates should be lowered. For now, it seems like the BoE will wait and watch before making any drastic moves. One thing’s for sure: businesses and consumers alike will be keeping a close eye on the next Monetary Policy Committee meeting! 👀 What’s your take on this? Will we see more interest rate cuts, or is the BoE playing it safe? Let’s discuss! 💬 #Inflation #Economy #InterestRates #FinanceNews #BankOfEngland #UKMarkets #EconomicGrowth #BOE #growth #mortgages #markets #investment

Don’t fight the MPC… The interplay between central bank monetary policy and commodity markets will remain a critical focus. Yesterday’s comments by Professor Alan Taylor, an external member of the Bank’s Monetary Policy Committee (MPC), pointed out the easing of inflation could make way for significantly accelerated rate cuts by the Bank of England. This is a key development, as central bank actions, particularly in the G10, are key drivers of commodity pricing. While monetary policy can have an immediate effect on market sentiment, the supply/demand fundamentals in commodities, especially in base metals and energy, typically have a more lagged impact. With central banks closely watching each other’s moves, we're likely to see upside in commodity markets driven by rate cuts and the revaluation of inflationary concerns in 2025. At the same time, supply constraints, geopolitical risks, and long-term structural changes in energy markets could exacerbate these price movements in the medium term. In short, the risk in commodities—especially metals and energy—appears skewed to the upside as we move into 2025. Central banks monetary policy will be key in shaping this outlook as captured by Professor Taylor's prescient statements. #Macroeconomics #Commodities #BankOfEngland #CentralBankPolicy #Inflation #Energy #BaseMetals Financial Reporter Rozi Jones

First ZKR, then Goldman Sachs and now Morgan Stanley.....wonderful to be in such illustrious company. Jokes aside, it is interesting to see Morgan Stanley now also looking for significant rate cuts from the MPC in 2025. Watch this space!

𝗛𝗮𝘄𝗸𝗶𝘀𝗵 𝗕𝗼𝗘 𝗵𝗶𝗴𝗵𝗹𝗶𝗴𝗵𝘁𝘀 𝗶𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻 𝗿𝗶𝘀𝗸𝘀 𝗮𝘀 𝗿𝗮𝘁𝗲𝘀 𝗿𝗲𝗺𝗮𝗶𝗻 𝘂𝗻𝗰𝗵𝗮𝗻𝗴𝗲𝗱 ⏸️The Bank of England has kept interest rates unchanged at 4.75% taking a gradual approach towards easing its monetary policy as inflation risks remain in focus. In a six-to-three decision, most members of the Monetary Policy Committee warned that recent increases in wages and prices had “added to the risk of inflation persistence”. 🦅In a similar hawkish tone to Fed Chair Powell yesterday, BoE Governor Bailey indicated that “a gradual approach to future interest rate cuts remains right”. Forward guidance for 2025 decisions was limited as heightened uncertainty in the economy means the UK central bank “can’t commit to when or by how much we will cut rates in the coming year.” 📝Updated macro projections showed that policymakers penciled zero growth in the final quarter of this year, weaker than forecast in November. As a result, Investors have currently priced in just a 50% chance of a rate cut in February and only two cuts in 2025 as a whole. What’s your outlook on UK monetary policy in 2025? Comment below.👇 #bankofengland #interestrates #decision #monetarypolicy #inflation #risks #investing #markets #economy #growth Chart via FT

The economic calendar is quite busy ahead of the first day of summer, and we have today two announcements to dig into: the Bank of England (BoE)'s and the Swiss National Bank (SNB)'s respective rate decision. 🇬🇧 Kicking it off in the UK, the BoE has decided to maintain interest rates at 5.25% in a decision described as "finely balanced." The next BoE meeting in August is expected to be critical, with the inflation forecast playing a crucial role. So this is "wait and see" - and hope for the best. Some key takeaways: 💼 Interest Rate Hold The BoE has opted to keep the rates steady at 5.25%, despite yesterday’s inflation print - which fell to the target of 2% for the first time in three years. 📉 Potential Rate Cut The decision, with a seven-to-two vote by the Monetary Policy Committee, leaves the door open for a possible rate cut in the next meeting in August. 📊 Economic Context Despite the higher services inflation, the BoE maintains that this does not significantly alter the disinflationary trajectory. 🏛️ Political Implications The decision is a setback for Prime Minister Rishi Sunak, who has taken credit for the falling inflation and suggested that his government has set the stage for rate cuts. 📈 Market Reaction Following the announcement, GBP fell 0.2% against the USD, and the yield on the interest rate-sensitive 2-year Gilt dropped to 4.13%. 👉 The BoE's stance contrasts with other central banks like the European Central Bank and the Bank of Canada, which have already started lowering rates. #Finance #Economics #BoE #MonetaryPolicy #InterestRates #UKEconomy #Inflation #MarketTrends

[Capital at risk] This morning’s data showed that headline inflation in the UK rose to 2.2% in July, up from 2.0% in June. The reading came in below the market expectations of a 2.3% growth, moving back above the Bank of England’s 2.0% target. “It is the first time CPI has risen since February 2023 after the BoE raised interest rates to 16-year highs to bring down inflation. The Bank of England acknowledged the battle against inflation is not done” comments our Chief Investment Officer, Richard Flax. “Monetary policy will need to stay restrictive for an extended period until the risks of inflation returning sustainably to the 2% target in the medium term have diminished further” concludes Flax. Let’s take a step back, what is inflation and what causes it? Follow up here: https://lnkd.in/e5jjfKG3 #CPI #BoE #investments #savings #monetarypolicy #economy #wealthmanagement #moneyfarm

Want to know more about why the FT's optimal model of UK core inflation is lower than the standard measure? Read on from the FT Monetary Policy Radar https://lnkd.in/gYQAMuHu