The Fed (Federal Reserve) meeting went, as expected, with no rate cut. Jerome Powell stayed on the hawkish side, suggesting he is in no rush to cut rates further. He highlighted stagflation risks but admitted that he and the Fed have no idea of the potential tariff implications yet. Dollar was marginally higher last night and that has continued this morning.
The pound was buoyed during Asian hours on reports that President Trump is set to announce a trade pact between the UK and US.
*Daily move - against G10 rates at 7:00 am, 08.05.25
** Indicative rates - interbank rates at 7:00 am, 08.05.25
All eyes on the Bank of England (BoE) at noon today. It is widely expected the bank will cut rates by 0.25%, taking the base rate down to 4.25% - the lowest since April 2023. Furthermore, markets are expecting a dovish narrative from the bank - we are keen to see how members of the MPC have voted. Anything to suggest that the BoE will be looking to cut rates lower than what markets are expecting (down to 3.5% by the end of the year), then we would expect the pound to be hit in a negative way.
Read more about the BoE's interest rate decisions here: When is the next BoE interest rate decision?
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