The federal reserve, as expected, cut its key interest rate over night by 0.25 points to a range between 1.75% and 2%. The move was anticipated and largely priced into the markets so the reaction by investors was small and limited, GBP/EUR moved to a high of €1.1322 before falling away to the high €1.12’s and GBP/USD remained between a 40-pip range.
The main reason for the 2nd consecutive cut by the FED was down to global uncertainties and trade tensions that, they believed, had worsened over the summer. This wasn’t the easiest of votes for the FED with voting results mixed, seven in favour of this cut, two members wanted to hold, and one member was looking for a more aggressive cut.
President Trump was quick to react to the news and tweeted that ‘Powell and the Federal Reserve Fail again. No guts’ which would have weakened their already frosty relationship. The President feels the Fed needs to cut rates further as this well help negotiations with China and Europe and increase the economic activity in the US.