Hawkish Fed adds to dollar strength with Jumbo hike, BOE set to hike rates and begin selling assets, BOJ continues to hold rates ultralow despite Yen reaching fresh 24-year low.
September 22, 2022
GBP/USD 1.1274 GBP/EUR 1.1454 EUR/USD 0.9843 USD/CAD 1.3488 EUR/CHF 0.9625 EUR/SEK 10.8844 EUR/NOK 10.2036 EUR/DKK 7.4366 USD/ILS 3.4665 AUD/USD 0.6608 NZD/USD 0.5830 USD/SGD 1.4208 USD/JPY 145.77 USD/CNH 7.0991 USD/INR 80.7463 EUR/ILS 3.4124 GBP/ILS 3.9081 USD/ZAR 17.7151
Today sees the Bank of England’s delayed meeting, with the UK Central bank set to raise interest rates and begin selling assets built up in a decade-long stimulus program. Markets are currently torn on whether the MPC will deliver a 50-bps or 75-bps hike. It is also anticipated that the bank will confirm plans to sell more of the £895 billion of bonds acquired through quantitative easing during the last two years of the pandemic. Should the Bank of England take a more hawkish action, this could bolster the point which currently trades in the 1.12-1.13 range.EUR
According to executive board member Schnabel, the ECB must continue to raise rates despite a souring outlook for the euro-zone economy, stating that it is not certain that inflation has peaked.
European gas prices declined, as traders weigh on the higher stockpiles across the continent, and the relatively low volumes of gas being imported from Russia since Nord stream has closed.USD
The Federal Reserve gave a clear signal yesterday that they are willing to tolerate a recession as a necessary trade-off for controlling inflation. Yesterday, they rose interest rates by 75-bps for the third consecutive time, whilst forecasting 125-bps of hike before year end. The Fed rate is now between 3-3.25%.
In addition to the increasingly hawkish policy path, the Fed slashed growth projections and raised their unemployment outlook, with Powell admitting that there will be below-trend growth for a period. Share market declines deepened as odds of a soft economic landing appear to have diminished in the market’s eyes. The hawkish position of the Fed added to greenback strength with the dollar spot index trading 0.6% higher.ASIA/PACIFIC
The Bank of Japan continued to hold rates ultralow, only adding to the monetary policy divergence between the BOJ and most global central banks. The Yen slide to a fresh 24-year low as a result, ramping up calls for fiscal and monetary intervention in currency markets.
Meanwhile the Bank of Korea governor, Chang-yong hinted at large rate hikes after the Fed’s jumbo rate hike pushed the won past a 1,400, a level that is determined key by many.ILS
USDILS trades 0.2% higher today following yesterday’s Fed hike adding to the dollar’s robustness globally.Data & Events
ECB Economic Bulletin – 10:00 CET
BOE Rates Decision – 13:00 CET
Euro-area Sept. Consumer Confidence – 16:00 CET
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