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  • Writer's pictureChris Broadfoot

Currency Update: Calm Markets Amidst Major Central Bank Announcements

In the wake of significant news from major central banks, the past 48 hours have been notable for their lack of extreme volatility in currency markets. Despite the anticipation of potential turbulence, rates remained relatively stable this week.

The only rate to see a decent move was the Australian Dollar to the Japanese Yen, soaring almost 2% this week after the Bank of Japan left rates unchanged the yen has struggled after the Bank issued a very accommodative statement to support a historic decision to exit negative interest rates

  • AUD/USD - 0.6571

  • AUD/EUR - 0.6049

  • AUD/GBP - 0.5192

  • AUD/NZD - 1.0870

  • AUD/JPY - 99.60

  • GBP/USD - 1.2657

  • EUR/USD - 1.0860

Key players such as the Reserve Bank of Australia (RBA), the US Federal Reserve (US Fed), the European Central Bank (ECB), and the Bank of England (BoE) all opted to maintain interest rates at their current levels. With this widely expected outcome factored into market pricing, the lack of surprises contributed to the overall steadiness in exchange rates.

Today, the Bank of England's decision to leave the Bank Rate unchanged was complemented by a notable shift in sentiment among the members of the Monetary Policy Committee (MPC). While the rate remained static, the voting pattern hinted at a more dovish stance following the meeting.

In contrast to the previous gathering where six out of nine members advocated for maintaining rates, today's vote saw eight members in favour of no change and one member in favour of a rate cut. This tilt towards a potential rate reduction underscores the growing likelihood of such a move in the near future.

In light of these developments, the probability of a 25 basis point rate cut at the June meeting soared to over 65% post-announcement, marking the highest level in recent weeks. Although the May meeting may be deemed premature for initiating rate adjustments, the upcoming June gathering is now firmly in focus as a potential juncture for policy action.

Amidst this backdrop of central bank deliberations, the currency markets have exhibited a notable degree of stability, reflecting the tempered expectations and cautious anticipation of future policy shifts.

As we navigate through these developments, we remain vigilant and prepared to assist our clients in managing any ensuing currency fluctuations with precision and expertise. Stay tuned for further updates as the landscape continues to evolve.

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