Though the dollar didn’t get much of a boost from the Federal Reserve last night, the central bank’s statement hit the Dow Jones hard, feeding into a negative European open.
The Fed insisted that its ‘policy stance is appropriate at the moment’, failing to bow to pressure from Donald Trump to cut rates in the face of America’s weak inflation. On that note, Jerome Powell said that, because ‘some transitory factors may be at work’, the central bank expects that ‘inflation will return to 2% over time’. That dashed hopes it would lower interest rates any time soon, dragging the Dow 160 points lower just as it was inching towards a fresh all-time high.
With its miners once again in retreat, and Lloyds (LON:LLOY) down 1.8% after it missed Q1 profit and revenue expectations, the FTSE fell 0.4%, sending it under 7350 for the first time in a month. Sterling, meanwhile, added another 0.1% against both the dollar and euro, somewhat tentative ahead of the first Bank of England meeting since the UK secured a ghoulish extension to Article 50 last month.
Mark Carney and his MPC chums are almost certain to keep rates unchanged this Thursday, more due to political uncertainty than an inability for the UK economy to withstand an increase. This makes the latest set of economic forecasts the more interesting part of the session, alongside Carney’s comments post-meeting.
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