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Currency Market Update - 27th September 2023

Currency Market Update The main talking point across the currency market is that of the Dollar gaining significant strength against both Sterling and Euro. 10yr Treasury bond yields in the US rose by more than 10 basis points and above 4.5% for the first time since 2007.

Investors are pricing in that interest rates will remain higher for longer, especially following the Fed Reserve’s recent decision to pause on rates, whilst indicating that the tightening cycle may not have come to an end as rates may need to be held higher for longer.

The Dollar retains its safe-haven status while weighing down heavier on the Euro, trading now at 1.06 against the Dollar.

The Pound-Dollar exchange rate currently sits at low 1.22, the lowest level since March. The recent rate pauses by both Federal Reserve and more recently Bank of England are pointing to very little if any rate hikes until at least Q1/Q2 of next year, whereby if inflation continues to fall then both Central banks may look to end their tightening cycle.

The BoE’s decision of a rate pause on 21 Sept did come as a surprise to many and perhaps made sense, due to better than expected inflation reading (0.6% better than forecast) and recent PMI figures, so inevitably.
Pound lost strength against both Euro and Dollar with no further rate hikes on the agenda, although analysts are not ruling out 1 further rate hike by BoE.



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