USD rally takes a pause but holds most if its gains.  The Fed meeting is still seen as having been a game changer and the outlook for the US economy should improve steadily. The US is seeing political risk for Europe and both political and economic risk for the UK. All this should see USD continue to strengthen over the medium term.

EUR

On Thursday, the Swiss National Bank (SNB), Norwegian Central Bank (Norges) and the Bank of England (MPC) met. Like the Fed, more focus was likely to be on the economic forecast for 2017 of the MPC. The Fed’s actions on Wednesday night may have scuppered any plans any of these banks had to be able to lower rates any further. EUR saw good selling as it broke 1.0450 with lows for EUR at 1.0364.

GBP

With lows for GBP at 1.2372, one would suggest those who still have GBP to sell use this correction to sell into, or at least leave stops just below Thursday’s low which stopped at an obvious technical level. The MPC stood pat on rates as the whole market had expected. Bank of England Governor Mark Carney said that currency volatility was likely to be an ongoing feature of the market, also saying that the strength of GBP recently had helped soften inflation and will allow economy to “run hot” to “some extent”. GBP dropped from 1.2540 to 1.2450 following the release. Carney also said that the strength of GBP had “softened the outlook for inflationary impact”, meaning that if GBP stayed strong, then price inflation from abroad would not be as high as their estimations. However, one feels that with the USD likely to get even stronger over the next few months, this pressure will kick back in, possibly even harder than the MPC’s original forecast.

We are already getting anecdotal information of the difficulties facing UK firms with end-of-the-year price increases, and sadly it is thought the UK economy is in for a very tough three to six months while those input prices pinch but one is still waiting for the trade benefit of lower GBP to come through.