The Fed increased interest rates by 0.25%, in line with consensus forecasts.

The Fed increased interest rates by 0.25%, in line with consensus forecasts. Despite a lowering of 2019 rate projections, the statement was less dovish than expected by markets.

The dollar regained some ground following the statement and European currencies retreated, although losses were recouped on Thursday as growth fears undermined the dollar.

There was a substantial reactions in other asset classes with equity markets declining sharply and US 10-year yields declined to 9-month lows with USD/JPY below 112.00.

Oil prices were unable to hold a technical recovery and lost ground as global growth fears persisted and commodity currencies remained under pressure.

The November UK headline consumer inflation rate declined slightly to 2.3% from 2.4%, in line with consensus forecasts, while the core rate also matched expectations at 1.8% from 1.9% and there was little impact with the data unlikely to have a short-term impact on Bank of England policy.

The CBI industrial trends survey recorded a headline orders figure of 8 from 10 previously, slightly above consensus forecasts while there was a stronger trend in output and export orders increased at the fastest pace since January. Sterling did make limited headway against a weaker dollar, but GBP/EUR fell towards 1.1075 level with markets unsettled by the increase in talk surrounding preparations for a ‘no-deal’ Brexit.

GBP/EUR held above 1.1075 after the Fed decision with Sterling above 1.2600 against the dollar. Risk aversion unsettled Sterling, although fresh speculation surrounding a second Brexit referendum provided some currency protection with a GBP/USD move to above 1.2650 from near 1.2600 with expectations that the Bank of England would make no policy changes on Thursday.

Economic Calendar

09:30GBP Retail Sales ex-Fuel (Y/Y)(NOV)2.30%2.70%
09:30GBP Retail Sales ex-Fuel (M/M)(NOV)0.20%-0.40%
09:30GBP Retail Sales (Y/Y)(NOV)1.90%2.20%
09:30GBP Retail Sales (Y/Y)(NOV)0.30%-0.50%
12:00BOE MPC Vote Unchanged(DEC)99
12:00BOE MPC Vote Hike(DEC)00
12:00BOE MPC Vote Cut(DEC 01)00
12:00BoE QE Purchase Target(M/M)(DEC)435B435B
12:00BoE Rate Decision(M/M)(DEC)0.75%0.75%
13:30USD Philadelphia Fed. Manufacturing Index(DEC)15.612.9
13:30CAD Wholesale Sales (M/M)(OCT)0.20%-0.50%
13:30USD Continuing Jobless Claims(NOV 24)1.650K1.661K
13:30USD Initial Jobless Claims(NOV 24)219K219K
23:30JPY National CPI Ex-Fresh Food (Y/Y)(NOV)1.00%1.00%
23:30JPY National CPI (Y/Y)(NOV)-1.40%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.