Macro Commentary

The US central bank cut rates by 0.25% this week as widely forecast, with the market expecting a further cut before year end.

Fed chairman Powell described the move as insurance against increasing global risks, though he insisted the US economic outlook remains favorable.

In the UK, we saw inflation unexpectedly drop this week to 1.7%, its lowest level since late 2016, meaning there is no pressure on the Bank of England to alter interest rate policy anytime soon.

With wages currently rising at 4%, this is a further boost to the consumer.

Brexit negotiations are ongoing with time running short, but little tangible progress has been made so far. The EU commission did vote overwhelmingly to approve a delay to the October 31st deadline, should the UK request one.

On the exchanges, sterling remains volatile but is holding on to its recent gains. The widely expected US rate cut had minimal effect.

GBP/USD has found a base for now at 1.2250, and is breaking higher this morning to test the pivotal 1.2550 level.

GBP/EUR remains well supported at 1.1000, and has pushed strongly higher overnight towards 1.1400, its highest levels since May.

GBP/USD – 1-year chart

Week ahead

Date Release Last Expected*
24/9/19 Public Sector Net Borrowing -2.0b 6.6b
26/9/19 US GDP Annualised QoQ 2.0% 2.0%

*Bloomberg survey

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1045 AUD/USD 0.6800
GBP/USD 1.2560 USD/AED 3.6730
GBP/EUR 1.1370 GBP/AED 4.6150
USD/CHF 0.9915 EUR/AED 4.0570
USD/JPY 107.95 XAU/USD 1503

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7341 +9.11%
S&P 3006 +19.94%
EUROSTOXX 3553 +18.38%
DFM GENERAL INDEX 2819 +11.42%

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.77888% 2 year 0.82%
6 month 0.84313% 3 year 0.82%
12 month 0.93850% 5 year 0.80%

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