Key interest rate decisions today

Daily Currency Update

Early data on Wednesday saw UK consumer prices rose by 0.40% on the month in November, resulting in an annual rise of 10.7%, a small drop from 11.1% the prior month. The data adds pressure on the Bank of England to tighten monetary policy further, ahead of their latest decision today. This news was followed by the days key event from the US, the conclusion of the Feds two-day policy-setting meeting. Interest rates were increased by 50 basis points, as widely expected, a step down after delivering four consecutive 75 bps hikes but signalled more increases by the end of 2023. Additionally, Fed Chair Jerome Powell warned that borrowing costs are likely to peak at higher-than-expected levels, given that inflation is still running well above the central bank’s target range. Comments from Powell after the meeting also highlighted more evidence will need to be seen to have confidence that inflation is on a downward trajectory. GBP/USD dropped from 1.2440 to 1.2380 as the announcements started at 7pm last night. A recovery back up to 1.2440 was seen within an hour but has been on the fall since. GBP/USD currently sits at 1.2320. GBP/EUR is also softer and is trading at 1.1600 currently, after being as high as 1.1660 on Wednesday.

Today is another data heavy day, as we await the Bank of England and European Central Bank latest interest rate hikes. Both central banks are also expected to tone down the size of their hikes to 50 basis points, from 75 bps last time. Any deviation from the expected announcements will add volatility to the GBP and EUR today and following comments will also be deciphered for the future path on managing inflation.