The Dollar trade-weighted index has been in a remarkably narrow 0.2% range in the past four trading sessions, ahead of today’s key Federal Reserve policy meeting.
The consensus forecast is that the Fed will deliver a 25bp rate cut (its first cut since December 2008) but there will be much focus on the language of the accompanying statement. The key question is whether this will be a one-off “insurance policy cut”, the beginning of a long easing cycle or something in the middle.
Sterling is up fractionally against the Dollar, with GBP/USD back up above 1.22, while GBP/EUR has appreciated 1% to near 1.10 thanks in part to the Euro’s weakness. The Euro trade-weighted index, which had appreciated 0.7% since 24th July, has given back 0.3% today. Eurozone GDP growth in Q2 (+0.2% qoq) was in line with expectations but down from +0.4% qoq in Q1 and core CPI-inflation fell by more than expected, to only 0.9% yoy in July based on preliminary data.
