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BoE held interest rates at 4%, as expected. It also announced it would slow its quantitative tightening programme, relieving pressure on Gilt markets. GBP was relatively stagnant.
Following interest rate cut Wednesday, CAD was on the backfoot due to the BoC's dovish tone and the fall in oil price.
USD remained relatively rangebound following Wednesday’s interest rate decision.
*Daily move - against G10 rates at 17:00 BST, 18.09.25
** Indicative rates - interbank rates at 17:00 BST, 18.09.25
Following yesterday’s interest rate decision, markets have been surprised by the Bank of Japan this morning. Interest rates remained the same, however, Japanese stocks slid as the BoJ unveiled plans to start selling its holdings of ETFs. We also saw an emerging split in the BoJ over the pace of monetary policy normalisation. Markets now anticipate that some BoJ members may vote for a rate hike in upcoming meeting, causing further JPY volatility to occur around meeting times.
GBP was under pressure this morning as the UK government borrowed significantly more than forecast between April and August. While the Office for Budget Responsibility projected borrowing at £72.4bn, actual figures reached £83.8bn over the period.
GBP was sold off, and this highlights the challenge for Labour and Reeves. Budgets can be relatively muted affairs; however, as we saw in 2022 with Liz Truss, they can also cause fireworks. Markets will be increasingly anxious as we approach what is becoming a high-stakes budget for the UK in November.
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