US Federal Reserve Chair Jerome Powell injected investors with a strong dose of optimism on 28 November, saying that the central bank’s policy rate is now “just below” estimates of a level that neither brakes nor boosts a healthy US economy, comments that many investors read as signalling the Fed’s three-year tightening cycle is drawing to a close.

Commenting on the apparent shift in thinking on US rate hikes,  Andy Scott, associate director at financial risk management consultancy JCRA, said: “Jerome Powell appeared to make a major shift in his view for how much further US interest rates need to be increased, saying the current rate of 2.25% was “just below” the neutral level. That contrasts sharply against his comments just last month that it was “a long way” from neutral, raising questions over whether Donald Trump’s numerous tweets and explicit comments the night before have influenced the Fed Chair.

“While the market is now only pricing in around a 50% chance of one rate hike next year - December’s increase is still fully expected and the Dollar is holding not far below its highs of the past 18 months. This probably tells you that for now, the market thinks that since the Fed is much less likely to raise rates next year, there’s probably almost zero chance that many of the other major central banks will.”