USD: Powell’s farewell, Fed fractures deepen
The Federal Reserve (Fed) held the funds rate at 3.50%–3.75%, exactly as expected, but the statement felt less like a routine hold and more like an acknowledgement that the risk balance has become more complicated. Policymakers explicitly elevated the geopolitical backdrop, noting that Middle East developments are driving a high level of uncertainty, while also upgrading inflation language to “elevated,” explicitly tying part of that to higher global energy prices. The growth description stayed broadly constructive, activity “solid,” unemployment “little changed,” job gains “low on average”, but the energy channel has clearly moved from a risk footnote to something closer to the policy narrative.
The surprise didn’t come from the decision, but the dissent. The decision landed 8–4, the most dissents in a single meeting since 1992, and the split wasn’t even pointing in one direction. One member wanted an immediate cut, while three others supported holding rates but rejected the statement language that preserves an easing bias, effectively arguing the Committee shouldn’t be pre‑signaling cuts when energy and uncertainty are rising again. Powell’s press conference put some shape around that debate: he suggested the center of the Committee is edging toward a more neutral posture and emphasized that changing guidance is itself “signaling,” implying the majority didn’t feel compelled to send that signal yet, even if the conversation is clearly getting more “vigorous.”
The presser also leaned into a “wait-and-see” stance that is quietly firmer than the easing-bias line might imply. Powell argued tariff-driven inflation should fade as a one-time effect and begin to subside soon, while also acknowledging that the oil impulse is still in front of the data and could bleed into core depending on how long disruptions last. That combination, tariffs fading, energy uncertain, basically validates patience: policy is near the high end of neutral / mildly restrictive, no one is calling for hikes “right now,” but the bar for cuts is higher than it was a few months ago. Markets briefly flirted with a sharper front-end repricing, but the bigger driver on the day was energy: oil surged, with WTI settling around $106 and Brent around $120, reinforcing the sense that crude is still the macro shock absorber, and it’s still leaking into rates and risk sentiment.
The other storyline, impossible to ignore, was the transition. Powell framed his decision to stay on the Board (for now) as institutional rather than political, warning the Fed is being “battered” by legal assaults and stressing that independence is fundamentally about making policy without political considerations. He also tried to pre-empt any “shadow chair” narrative, signaling he intends to keep a low profile once the handoff occurs, while publicly wishing Warsh well and saying he’ll take him at his word on resisting political pressure. In that light, the hawkish dissents can be read two ways at once: a genuine debate about guidance under supply shocks, and an early glimpse of how hard it may be for the next chair to rebuild consensus, especially if energy stays high and the market keeps expecting “calming” headlines that don’t actually restore physical flows.
EUR: ECB caution, limited FX impact
Yesterday’s data showed that Germany’s inflation rose in April, but by less than feared – suggesting the inflationary shock remains, for now, largely confined to higher energy prices, with knock‑on effects still limited. The national CPI rose to 2.9% y/y from 2.7% in March, while the harmonised European measure also stood at 2.9% y/y (est. 3.1%). Core inflation eased to 2.3% y/y from 2.5% previously.
In this context, we expect the ECB to strike a cautious tone while preserving full optionality. With the bar set high for any hawkish lean – amid an insufficient data backdrop to justify a firmer stance – we anticipate limited FX pass‑through. Beyond policy, today’s focus includes Q1 GDP, unemployment data for Germany and the euro area, and April CPI for the bloc.
EUR/USD’s re‑assertion above the 200‑day moving average near 1.1680, following earlier de‑escalation hopes, is now being tested. The pair has hovered tentatively above this level in recent days amid fading de‑escalation momentum, before coming under firmer pressure yesterday after President Trump rejected Iran’s interim deal aimed at reopening the strait.
GBP: All eyes on BoE as oil pressures sterling
Sterling is on the defensive against the US dollar this week as renewed geopolitical frustration around US–Iran talks keeps uncertainty elevated over access to the Strait of Hormuz. With oil prices up more than 15% week‑to‑date, the energy shock has reasserted itself as the dominant macro transmission channel, lifting the dollar and weighing on GBP/USD, which has drifted back below recent highs.
The immediate focus now turns to the Bank of England (BoE) meeting today. No change in BoE’s Bank Rate is expected, putting the emphasis squarely on the vote split, forward guidance, and revised forecasts. UK yields have already surged this week and, with Brent continuing to climb, markets are sensitive to any suggestion that policymakers are in no rush to respond to the renewed inflation risk. A decisively hawkish tone would likely trigger a knee‑jerk gilt sell‑off and strengthen the pound via the yield channel. But bonds, and by extension sterling, could be punished more severely if the BoE signals patience reminiscent of the 2022 “transitory” misstep. OIS pricing has reacted accordingly, with markets now once again implying more than three BoE hikes this year.
From a technical perspective, GBP/USD has slipped below its 100‑day moving average and is now testing the rising 21‑day MA, suggesting near‑term momentum is cooling but not yet broken. Importantly, the 50‑ and 200‑day moving averages cluster just above 1.34, creating a notable zone of medium‑term support. Daily RSI remains neutral but is bending lower, consistent with consolidation rather than trend reversal. Taken together, April’s price action still resembles a bull‑flag‑type consolidation following the sharp early‑month recovery, though confirmation will depend on how the BoE navigates today’s policy signal amid surging oil prices.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: April 27-May 01
All times are in BST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
