"The Fed would be MUCH better off CUTTING RATES as the US tariffs start to transition their way into the economy. Do the right thing" was the strong message by President Trump last night, as the Fed kept interest rates unchanged.
Typically, governments and central banks do not interfere with each others business (or so we are told), however this is no 'typical' government and so it probably is only a matter of time until the Fed lowers interest rates or Fed members risk getting fired.
As we have mentioned before, what the US does is replicated generally the world over in some shape or form. The BoE follows closely what the Fed does (for various reasons), so when things change in the US we can expect to see movement in the UK too.
That is highly likely to not arrive today because not only has the Fed decided to not move on rates this month (50bp cut expected this year by the way), the UK labour market shows continued signs that inflation is going in the wrong direction.
UK wage data released this morning continues to be inflationary and this is a major factor for the decision making on interest rates at the central bank. Headline inflation is expected to surpass 3% in the near-term (2% target) and even though the economy is struggling, inflation is a bigger risk factor (supposedly) on interest rates.
Higher rates mean a stronger currency, so the Pound continues to enjoy divergence on this variable versus the Euro in particular. But it's only a matter of time until this gap closes and this will see a change in value in £-€, something to be aware of for those exchanging this pair as the year goes on.
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