All eyes on Federal Reserve to signal rate hikes, and end to QE
January 26, 2022
GBP/USD 1.3498 GBP/EUR 1.1958 EUR/USD 1.1288 USD/CAD 1.2581 EUR/CHF 1.03848 EUR/SEK 10.4706 EUR/NOK 10.0386 EUR/DKK 7.4418 USD/ILS 3.1831 AUD/USD 0.7163 NZD/USD 0.6691 USD/SGD 1.3447 USD/JPY 114.16 USD/CNH 6.3266 USD/INR 74.7775 EUR/ILS 3.5935 GBP/ILS 4.2970 USD/ZAR 15.1712
Sterling trades flat against the dollar as we enter the London session, as people weigh up whether the Fed or BoE will pull ahead in the fight against inflation. Omicron has had a milder impact on the UK economy, which is to be short-lived as the UK returns to plan A, and an endemic approach to COVID-19.
The expectation is UK Inflation will get worse before it gets better. It is predicted to squeeze household budgets throughout 2022. The pound has strengthened slightly against the euro, with EURGBP pushed slightly lower by -0.1% on the day.EUR
The ECB has reported that they see the eurozone inflation outlook as no reason to change policy, quoting Russia tensions as the biggest uncertainty in Europe. Energy driven inflation is being subdued in France by price controls, despite this French recovery is expected to slow.
The second ballet in the Italian presidential election was unsuccessful, with a decision more likely as the week goes on, and the majority required falls.
The Euro has a slow start, trading lower against the dollar and sterling.USD
DXY is up 0.1% daily, as investors wait for the Federal Reserve to announce policy decisions. The market is currently pricing the Fed to leave rates unchanged. This cautious stance could provide relief to the NASDAQ and SPX, which closed -2.28% and -1.22% respectively over the last 24 hours.
Expectations are that today the FOMC will signal a 25 bp rate hike in March, with an outside chance that they announce the end of asset purchases.ASIA/PACIFIC
Asian markets were a mixed bunch yesterday. The Nikkei is down -0.44%, the Hang Seng trades flat, and the Shanghai Composite is up 0.66%.
The Bank of Japan has signalled they expect inflation to accelerate stably towards their 2% target, which after decades of low inflation, means businesses may need to raise prices.ILS
The Shekel trades up 1.1% from where it began on Monday. Yesterday, the Shekel reached its weakest point against the Dollar in two months.
With the Bank of Israel indicating potential interest rates are capped at 0.25% (currently 0.1%), the Shekel is expected to weaken ahead of the FOMC meeting today.Data & Events
FOMC meeting and rate decision
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