EUR/USD declines as Powell casts doubt on rate cut

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26 June 2019


The main pair paused its appreciation trend yesterday, balancing below the 1.14 level throughout most of the day.

t continued to trend downward as Fed’s chairman, Jerome Powell, suggested that the central bank is not yet sure whether the recent uncertainties will prove to be more than ‘short term swings’ in sentiment, hence does not want the Fed to overreact. “The question my colleagues and I are grappling with is whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation”, mentioned Powell in his most recent remarks. During the interview yesterday FOMC member, James Bullard, suggested that a 25 basis point cut would be warranted, but that he doesn’t call for a 50 bp move. Considering that he’s one of the most dovish FOMC members – the only one who voted for a cut during last week’s Fed meeting – it might confirm that the 50 bp. cut may be less likely than the markets believe.

Sterling pairs gain as fears over no-deal Brexit mount

In the morning it seemed like the British Pound was on course to break its losing streak. However, early buying was not enough and Sterling dropped against both the US Dollar and the Euro in the second half of the day and ended the day even lower as markets started worrying the UK is edging closer to leaving the EU without a deal in place.

In the context of Sterling, it’s worth adding that during Tuesday’s parliament address, Mark Carney confirmed that in the event of no-deal Brexit the rates would be lower than in the case of an orderly departure from the EU. Such action would likely be needed to support the economy and restore confidence among businesses that have already taken a toll from Brexit. After the recent weakening of the economic data, the BoE recently cut its growth forecast and now expects flat growth in the second quarter, from 0.2% during the earlier review.