??Central Bank Decisions Trigger Currency Market Shifts!

On Thursday, both the pound and the Swiss franc experienced significant declines. This came as a result of the British and Swiss central banks deciding to keep their interest rates unchanged. Meanwhile, the U.S. dollar surged to a 6.5-month high following signals from the U.S. Federal Reserve that its policy would remain restrictive for an extended period. The Japanese yen also faced pressure, dropping to its lowest level since November ahead of the Bank of Japan's policy announcement scheduled for Friday. In Sweden and Norway, central banks made expected 25 basis point rate hikes.

?

The Bank of England made a surprising move by ending a streak of 14 consecutive rate hikes. They voted narrowly, with a 5-4 margin, to maintain the Bank Rate at 5.25%. This marked the first time since December 2021 that the bank did not raise rates. As a result, the pound plummeted, reaching its lowest point since March, briefly touching $1.2231 before stabilizing around $1.2270. Sterling also weakened against the euro, with the euro trading at 86.7 pence.

?

Goldman Sachs strategists, led by Michael Cahill, noted that the Bank of England's decision suggests a focus on factors like the lagged effects of policy, the level of interest rates, and a more balanced approach that avoids excessive tightening. While this approach may protect economic activity, it leaves the pound more vulnerable.

In addition, the Swiss franc depreciated after the Swiss National Bank unexpectedly maintained its interest rates, breaking a streak of rate hikes that had been in place since March 2022. However, the central bank did keep the door open for potential future rate increases.

?

As a result of these developments, the euro saw a significant rise against the Swiss franc, poised for its most substantial one-day gain since June. The U.S. dollar also surged, gaining 0.8% against the Swiss franc to reach its highest level since June 13.

?

The weakening of the Swiss franc was expected after the surprising central bank decision, as noted by ING strategists.

In summary, the day's currency movements were influenced by central bank decisions, with notable repercussions for the pound, Swiss franc, euro, and the U.S. dollar.

In order not to miss similar news, you can subscribe to the newsletter now.