Home Daily Commentaries Fed’s indication of slow rate hikes gives relief – USD holds losses 

Fed’s indication of slow rate hikes gives relief – USD holds losses 

Thursday 24 November, 2022

Daily Currency Update

With Wall Street shut for Thanksgiving and the US dollar close to a 3-month low, USD seized onto losses minutes after the Fed backed the idea of the central bank raising the rates in smaller steps from next month. Officials were principally content they could now move in smaller steps, with a 50 bp rate rise likely in December after four consecutive 75 basis point increases. "The Fed will be happy to move rates by 50 basis points in December and 25 basis points from the first meeting next year," said Niels Christensen, chief analyst at Nordea, noting that the Fed will still feel it needs to do more to bring inflation down. The USD index was down 0.1% at 105.82, after it slid 1.1% on Wednesday. The Fed has taken interest rates to levels not seen since 2008. However, somewhat cooler-than-expected U.S. consumer price data has stoked expectations of a more moderate pace of hikes. WTI spot price is at a current level of 79.74, down from 80.07 the previous market closing.

Key Movers

ECB's comparable minutes to Fed released today presented its rate setters fear that inflation may now be getting entrenched in the euro zone. EUR continues to play with the multi-month resistance line around 1.0450 amidst the continuation of the upside momentum this morning. Cable edged slightly lower but managed to hold above 1.2117 after having touched its highest level since mid-August above 1.2130. The upside in the pair, however, appears capped on account of looming Brexit concerns. UK Prime Minister Rishi Sunak said that Britain will not pursue any post-Brexit relationship with the EU "that relies on alignment with EU laws”. Moving forward, thin market conditions could exaggerate the moves in GBP/USD pair while traders will also closely follow the speeches from the Bank of England (BoE) policymakers in the day ahead.

Expected Ranges

  • EUR/USD: 1.0359 - 1.0445 ▼
  • GBP/USD: 1.2029 - 1.2144 ▲
  • AUD/USD: 0.6705 - 0.6773 ▲
  • USD/CAD: 1.3317 - 1.3418 ▼