Markets prepare for Fed rate cut

• USD weakened as markets increased expect 0.25% rate cut tomorrow
• UK average earnings data in line with expectations
• Canadian CPI before interest rate decision tomorrow

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Yesterday's currency recap

There was little data of consequence yesterday. USD weakened slightly across the day as markets continue to firm up their opinion that the Fed will cut interest rates by 0.25% tomorrow.

‍AUD continued its momentum yesterday, assisted by the weakening USD, solid commodity prices, and continued momentum in Chinese equity markets.‍

EUR weakened modestly yesterday after Fitch opted to downgrade France’s credit rating on Friday, amid growing uncertainty over the country’s political situation. Although the FX movement was relatively muted, concerns about the 2026 budget could continue to weigh on the euro.‍

GBP net benefitted, climbing to a new high since July against USD.

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Today's GBP rates

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*Daily move - against G10 rates on 16.09.25

** Indicative rates - interbank rates on 16.09.25

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Key data points

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What we think

Yesterday was very data light, and as expected the markets were relatively muted. The dollar edged off, as markets continue to anticipate an interest rate cut of 0.25% by the Fed tomorrow. Due to the proximity, markets may be more sensitive to retail sales data this afternoon, and it is one to keep an eye on. The same applies to the Canadian CPI this afternoon.

This morning the UK’s average earnings index came out in line with expectations at 4.7%, and has had a muted impact on the FX markets. It is key to remember wage rises continue to outpace price rises. For the UK, eyes will be on tomorrow’s CPI reading before Thursday’s interest rate decision.

The headlines will be dominated by Trump’s state visit, with new technology partnerships expected to be announced following Trump and Starmer’s day at Chequers on Thursday, as they host several technology CEOs.

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Read more about upcoming events here:

• When is the next Fed interest rate decision?
• When is the next BoE interest rate decision?

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