US dollar steady following Fed’s hawkish pause

Pound (GBP) rangebound following Reeves’s growth speech

The pound (GBP) traded sideways yesterday, following a key speech by UK Chancellor Rachel Reeves outlining her plans to boost growth.

The speech appeared to receive a tepid response from investors, many of whom seemed unconvinced her new proposals will be enough to deliver the levels of growth the government is targeting.

Meanwhile, in the absence of any notable UK data, the pound may struggle to find direction today.

Euro (EUR) stalls ahead of expected ECB rate cut

The euro (EUR) traded in a narrow range on Wednesday, with EUR investors reluctant to make any moves in advance of the European Central Bank’s (ECB) latest interest rate decision later today.

With the ECB widely expected to cut, markets expect the single currency to weaken. Although how much will depend on how dovish the bank is in its forward guidance.

Coming up, ahead of the ECB rate decision, EUR exchange rates may also be influenced by the Eurozone’s latest GDP figures. An expected slowdown in growth in the last quarter of 2024 could leave the euro vulnerable to even steeper losses.

US dollar (USD) steady following hawkish Fed rate decision

The US dollar (USD) was initially subdued yesterday as markets braced for the Federal Reserve’s latest policy meeting.

However, these losses were reversed by the time the Fed announced it would be leaving rates on hold this month, while also striking a hawkish tone in its forward guidance.

The US will also publish its fourth-quarter GDP figures later today. Expect to see the US dollar strengthen if the data reveals the US economy continued to expand at a healthy pace at the end of 2024.

Canadian dollar (CAD) holds steady despite BoC rate cut

The Canadian dollar (CAD) held its ground on Wednesday, with the currency taking a widely expected interest rate cut from the Bank of Canada (BoC) in its stride.

With domestic data in short supply today, the direction of the ‘loonie’ may be tied to oil price dynamics. If prices continue to soften, this could drag on CAD exchange rates.

Australian dollar (AUD) slips amid rising odds of an RBA rate cut

The Australian dollar (AUD) trended broadly lower overnight on Wednesday, pressured by growing expectations the Reserve Bank of Australia (RBA) may begin cutting interest rates next month.

New Zealand dollar (NZD) undermined by slump in business confidence

The New Zealand dollar (NZD) also fell in overnight trade, with the ‘kiwi’ being undermined by a surprisingly sharp deterioration in domestic business confidence this month.

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