US dollar rallies as Fed set to leave rates on hold for longer
Philip McHugh May 8th 2025 - 2 minute read
Pound (GBP) flat in advance of BoE rate decision
The pound (GBP) traded sideways through yesterday’s session, with GBP investors reluctant to alter their positions ahead of the Bank of England’s (BoE) impending interest rate decision.
However, Sterling then jumped in overnight trade, amid reports US President Donald Trump will announce a new trade framework with the UK later today.
Unsurprisingly, the focus will be on the BoE today. While a 25bps rate cut is largely priced in, the pound may soften if policymakers signal more cuts will follow in the second half of the year.
Euro (EUR) firms on positive German factory data
The euro (EUR) ticked broadly higher on Wednesday, following the release of Germany’s latest factory orders data.
March’s figures reported a much stronger-than-expected rebound in order growth, helping to feed recent optimism over the Eurozone’s largest economy.
The euro may build on these gains today, after a similarly strong improvement in Germany’s industrial production release.
US dollar (USD) jumps following Fed rate decision
The US dollar (USD) was rangebound through most of yesterday’s session as markets braced for the Federal Reserve’s latest interest rate decision.
USD exchange rates then jumped following the Fed’s rate announcement. In addition to leaving rates on hold this month, Fed Chair Jerome Powell’s suggestion the bank await further clarity amid the current uncertainty swiftly erased bets for a June interest rate cut.
In addition to the fallout from the Fed’s rate decision, movement in the US dollar today may also be driven by the latest US initial jobless claims, with a drop in new claims potentially lifting USD sentiment.
Canadian dollar (CAD) slips as oil prices stall
The Canadian dollar (CAD) ticked lower on Wednesday as the recent recovery in oil prices appeared to peter out.
In the absence of any notable CAD data, it’s likely movement in the ‘loonie’ will continue to be influenced by oil price dynamics today.
Australian dollar (AUD) rebounds on US-China trade deal hopes
Trade in the Australian dollar (AUD) was mixed in overnight trade. The ‘Aussie’ initially slipped in the wake of the Fed’s hawkish rate decision, before US-China trade deal optimism helped to revive AUD demand through the Asian trading session.
New Zealand dollar (NZD) fluctuates amid mixed market mood
The New Zealand dollar (NZD) also traded erratically overnight, with the ‘kiwi’ following a similar trajectory to its antipodean cousin.
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Written by
Philip McHugh