Dollar firmer post Fed hike

The euro and sterling have both lost ground against the dollar following the Fed’s latest interest rate increase, falling to around $0.98 and to $1.12 respectively and leaving the single currency-pound exchange rate trading at about 87.5p

In government bond markets, US 10-year yields are not much changed at around 3.55%, though 2-year yields are more than 10bps points higher at over 4.10% on the back of the Fed hike, while German and UK 10-year yields are up to 1.90% and 3.30% respectively

The Fed raised interest rates by 75 basis points to a range of 3.0%-3.25%, as largely expected, and indicated there would be a further increase of 125 basis points (to 4.25%-4.50%) over the final two meetings of this year with rates peaking next year at 4.50%-4.75%

The Bank of England announces its latest interest rate decision at noon today – a hike of 50 basis points (to 2.25%) seems on the cards, though the market sees some chance of a 75 basis points move

ECB member Schnabel says “a looming downturn (in the Euro area) would have a dampening effect on inflation (which) we take into account when calibrating our monetary policy, (but) the starting point of interest rates is very low, so it is clear that we need to continue raising rates”

Data due today includes consumer confidence in the Euro area and jobless claims in the US