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Fed Slows

Today's news headlines:

'Fed raises rates by half point as central banks enter new phase'. At its final meeting of the year yesterday, the Federal Open Market Committee unanimously decided to increase federal interest rates by half a percentage point up to the 4.25%-4.5% range. However, Federal Reserve Chairman Jerome Powell signaled in the following press conference that tightening will continue and won’t stop until the Fed is confident inflation is moving towards the 2% target. The dot plot now points towards a federal funds peak rate of 5.1% next year, a higher level than previously expected. Economists are confident that inflation has peaked in the US and Europe, with the pivot to smaller rate rises likely to be followed by the Bank of England as well as the European Central Bank later today. (Financial Times)

'Hunt looks at prolonging energy aid for all companies'. The business energy package, focusing on providing all British businesses with aid towards their energy bills, will potentially be extended past its initial expiration date of March 20th. UK chancellor Jeremy Hunt is exploring plans to change the government’s support package so that it can keep helping British businesses for longer but would be set at a lower level than the current six-month energy package. The extension is estimated to cost the government £29bn amid fears that energy prices will continue to be elevated will after next spring. (Financial Times)


European stocks are expected to open in the red this morning amid caution ahead of Bank of England and European Central Bank meetings later today. All eyes will be on the two central banks today, with markets expecting both to follow in the Fed’s footsteps and opt for a half percentage point hike. Crude oil prices dipped overnight after a three-day rally as weak Chinese economic data coupled with hawkish tones out of the Fed raised caution over demand growth.


Chinese Retail Sales y/y: -5.9% vs -0.5% previously
Swiss National Bank Policy Rate: 1.00%
Bank of England Official Bank Rate: 12:00PM
European Central Bank Main Refinancing Rate: 1.15PM
US Retail Sales: m/m: 1:30PM
US Unemployment Claims: 1:30PM
European Central Bank Press Conference: 1:45PM

Interbank rates*:

GBP/USD: 1.2370          
GBP/EUR: 1.1625
EUR/USD: 1.0640
USD/CAD: 1.3570


Please contact your Dealer about any upcoming FX requirements you may have, or call +44 (0)20 3465 8200. 

*Indicative interbank rates taken on the day of writing. Please speak to your Dealer to find out the current rates available for you.