Home Daily Commentaries ECB hike expected after the Fed leave rates unchanged

ECB hike expected after the Fed leave rates unchanged

Daily Currency Update

The FOMC decided to leave the policy rate unchanged at 5-5.25% last night in their latest meeting. FOMC Chairman Jerome Powell explained that they are "strongly committed to 2% inflation" and that they have made good ground in tackling inflation. However, the FOMC is conscious that the full effects of monetary tightening are yet to be felt and that growth is expected to remain subdued. Powell also gave markets information regarding future hikes by stating that nearly all policymakers believe further hikes this year will be appropriate.

The US Dollar Index (DXY) rebounded to regain the 103.00 level after the Fed's announcement to leave rates unchanged, markets forecast peak rates now around 5.6%.

Key Movers

The main market mover today is the ECB's rate decision this afternoon. Market consensus is a 25 bps hike, this will result in the highest interest rates in the Eurozone for 22 years. The Central Bank is expected to leave the possibility open for further hikes to combat persistent inflation.

Following the ECB's decision, markets will see US data releases in the form of retail sales, imports & exports, and initial jobless claims.

Expected Ranges

  • GBP/USD: 1.2550 - 1.2725 ▼
  • GBP/EUR: 1.1640 - 1.1760 ▼
  • EUR/USD: 1.0760 - 1.0900 ▲