US Dollar weaker on trade tensions and rate cut

• Sterling standing its ground amid polling

• Australian Dollar stronger overnight

Last night, Wednesday 30th October, the Federal Reserve delivered on the expected 25 basis points rate cut, but did maintain a hawkish tone. The wording of the statement was less conservative than previous meetings and currency markets will now be watching the next set of economic data very carefully in order to gauge when the next move will be made. For now, it looks like yesterday’s interest rate cut will be the last in the cycle. This was the third successive cut and although the market was expecting the news, the US Dollar has weakened.  Global uncertainty is certainly weighing on the Dollar; until a trade deal is approved and until we see a pick up in the data, the weakness is likely to persist.

Sterling standing its ground amid polling

Sterling has managed to more or less hold on to its recent gains after the election was confirmed for 12th December. The Pound has gained almost 6% this month after Conservative UK Prime Minister Boris Johnson announced the election in an attempt to break the Brexit deadlock.  Data is likely to remain side-lined as markets react to polling data. Most pollsters have the Conservatives well ahead and investors are viewing this as a positive for the Pound. As long as this remains the case, Sterling should hold on to its current gains. Any narrowing of the polls and the Pound will likely falter.

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Australian Dollar stronger overnight

The Australian Dollar rose overnight despite a mixed set of data releases. September’s lending data from the Reserve Bank of Australia (RBA) was sluggish at 2.7%, which is the lowest since 2017. Building permits however were reported at 7.6% against an expectation of a 0.1% rise. The rebound in house prices will certainly have helped, but it is not clear if this is the bottom of the cycle.

In terms of data today, Europe will be the focus this morning. Inflation data is due and if it declines further this may add more pressure on the European Central Bank (ECB) to act to loosen policy. Q3 Gross Domestic Product (GDP) data will also be watched closely, as global growth slows dramatically.