Wednesday was another rollicking day for stock markets with the Federal Reserve’s second consecutive interest rate cut bringing another burst of optimism. Today also begins with promising news from the trade war. Overnight, Donald Trump claimed a one-year agreement with China had “settled” the rare earth minerals issue.
Interest rates could soon be eased in the United Kingdom, too. Currency markets certainly think so, as the root cause of sterling’s struggles this week has been a dovish repricing of the interest rate outlook. In short, rates are expected to fall faster than many thought, which has caused the pound to drop like a stone by around a cent against both its main rivals since Monday.
While the Fed did agree to another quarter-point cut last night, chair Jerome Powell was at pains to stress an identical decision in December was far from a foregone conclusion. Up to then, financial markets had been betting heavily on another cut before the year is out.
Nvidia, titan of the AI chip universe, became the first ever company to be valued at $5 trillion, just three months after crossing the $4 trillion mark. But peer beyond the hype and current events do feel a little detached from economic reality. How does the furious market rally square with an uncertain inflation outlook, falling consumer confidence, and widespread talk of an AI bubble that could pop at any moment?
Uncertainty over the autumn Budget hasn’t stopped borrowers and lenders navigating the mortgage market. Individual net mortgage borrowing rose to a six-month high of £5.5 billion in September, suggesting demand remains strong amid economic stress.
This morning, the Bank of Japan voted to keep interest rates on hold at 0.5%. Policymakers haven’t opted to hike rates since January, when they were first brought to their highest level since 2008.
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