ExchangeRates.org.uk – There was no move by Fed Chair Powell to signal an early cut interest rates and equities remained under pressure into the European close.The slide in risk appetite undermined Sterling as with the Pound to Dollar (GBP/USD) exchange rate dipping to lows at 1.2910 and substantially below 6-month highs of 1.32 posted on Thursday.
The Pound to Euro (GBP/EUR) exchange rate was unable to hold a brief rally and traded at 7-month lows close to 1.1750.
Fed Chair Powell stated that the US Administration is embarking on significant policy changes in the fields of trade, immigration, fiscal policy and regulation.
He expects there will be a substantial economic impact, but there is a high degree of uncertainty at this stage.
He noted that tariff increases are likely to be more substantial than expected.
In this context, there are risks of higher than expected inflation and weaker growth.
Powell insisted that it was too early to determine the impact on monetary policy and that it was a good time to take a step back and let things clarify.
Markets are very confident that rates will be cut by mid-year with a 50% chance of a May move, but there was no hint of any early move to underpin confidence.
The S&P 500 index posted a further decline of close to 4.0% after Powell’s comments.
The FTSE 100 index slumped 4.9% on the day, the lowest level since mid-December.
The Pound posted significant net losses, although it strongly out-performed the Australian dollar which suffered a huge 4.5% decline on the day which pushed GBP/AUD sharply higher to 9-year highs near 2.14.
This content was originally published on ExchangeRates.org.uk
