he Fed did, of course, cut interest rates for the third time this year at its most recent meeting in late-October, although the minutes of the meeting made it very clear that no further rate reductions would be necessary. Policymakers noted that easing was required due to global growth risks and trade uncertainties. They did, however, state that rates would be kept unchanged ‘as long as incoming information about the economy did not result in a material reassessment of the economic outlook’.

The less dovish message from the Fed was largely expected, particularly given recent comments from Chair Powell, so the reaction in the currency markets was fairly limited. EUR/USD remains largely stuck in a range, with traders instead looking for some sort of catalyst for a move from either trade war discussions or the ongoing impeachment hearings into President Trump.

As far as the former is concerned, a report yesterday suggested that the signing of the ‘phase 1’ trade deal will now not take place until 2020. The news has triggered a little bit of strength in the safe-haven Japanese yen, although the move has been limited, with investors not getting overly concerned at this stage.

Election optimism supports the pound

The pound remained bid against the US dollar on Thursday morning, making a march back towards the 1.295 level.

There has been no real trigger behind the move upwards in sterling in the past 24 hours, aside from the markets’ continued optimism that the Conservative Party will win a majority at the pending general election. The last seven opinion polls have now all shown at least a 10% advantage for Johnson, which should be more than enough to secure a majority should this pattern be replicated on polling day.

Tuesday’s TV debate between Johnson and Corbyn did not shift the balance in either direction, although that’s not to say that future debates won’t have at least some bearing on the polls. While yet to be confirmed, Sky News is expected to hold the next debate on Thursday 28th, with the BBC equivalent set to take place the following day.

ECB to release latest meeting accounts

As mentioned yesterday, this week has been a pretty quiet one so far in terms of major macroeconomic or policy news out of the Eurozone.

Activity should, however, pick up from this afternoon, with the European Central Bank to release its latest meeting accounts. We expect the minutes to reiterate that the bank stands willing to increase easing measures should the Euro Area economy take a turn for the worse. Then on Friday morning, the markets will have the latest PMI numbers to digest. Any signs of an uptick here could provide support for the common currency going into the end of the week.