Last night’s Fed announcement saw Mr. Powell convey a hawkish message that the Fed is not finished with rate rises yet and that they are intent on crushing inflation. The central bank chose to raise by 75bps, their 3rd consecutive increase of a similar amount. The headline rate now sits at 3.25% with last night’s forecasts confirming that the Fed sees the year ending at around 4.5%. This implies there could be another 1.25% of collective increases remaining this year, and puts a 75bps hike on the cards for next month’s meeting. This is hawkish and bullish for the buck.
The greenback gyrated across the evening. The first move of the night saw big flows into the greenback with GBPUSD sinking to $1.1240. This then reversed and saw the pair move to $1.1350. As Jay Powell’s press conference came to a close, the market faded this move and pushed it back to the $1.12 handle again.
Next up – the Bank of England at lunchtime today. The consensus is for a 50bps hike, although the door is open to a different outcome. This means we can expect more volatility across the afternoon.
Written by Viv Savani. 6:20am, September 22nd 2022
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