After weeks of currencies jumping and falling, as the markets react to US president Donald Trump’s on-again, off-again tariffs, the markets have been practically stable in recent days.
Though that could all change by Friday.
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The current stability is likely because both the US Federal Reserve and the Bank of England are due to announce interest rate decisions this week. The Fed’s announcement is this afternoon and the Bank’s is tomorrow.
While both are predicted to hold interest rates where they are to try and keep inflation from rising, both financial institutions will indicate when rate cuts may come.
The banks are in a difficult spot, because tariffs are increasing the prices of goods, creating inflation, which would suggest interest rates should stay high, but governments desperately need growth, which they can encourage by lowering interest rates and encouraging spending.
The stubbornly high interest rate in the UK, coupled with the looming stamp duty deadline saw buyer demand fall to the lowers levels since November 2023. The Bank of England’s decision this week and its analysis on whether it expects inflation to rise or fall in the months ahead will have a significant impact on anyone looking to buy or sell a home.
The euro is caught in a similar situation, with traders waiting to see if incoming German chancellor Friedrich Merz’s massive €1tn investment plan will be voted through government. It has huge potential to stimulate growth in the country and the eurozone, but legislators may vote it down on Friday, leaving the government in a very difficult spot.
You can see the uncertainty of what the banks will do and where the markets are headed in the price of gold. When traders aren’t confident in a currency’s strength they look to buy “safe haven” commodities that traditionally hold their value even when markets fall. On Tuesday, gold reached an all-time high of over $3,000 per ounce.
