Home Daily Commentaries Dollar drops as Fed hikes rates 0.25%

Dollar drops as Fed hikes rates 0.25%

Daily Currency Update

GBP/USD has pushed higher since yesterday evening as the US Federal Reserve confirmed another 0.25% interest rate hike with many expecting that this will be the last in its current tightening cycle. Fed Chair, Jay Powell advised that the door was open to more hikes should economic data show price pressures were returning however with CPI now at 3% after 12 consecutive monthly falls it seems the job is done, and any more action could cause more harm than good. Other gauges of inflation like core CPI, which strips out volatile food and fuel costs, Personal Consumption Expenditure, and the Producer Price Index have all trended lower for several months to the extent that it seems more likely than not that rates will now be held at their current 5.5%. GBP/USD was trading just above 1.29 as the decision was announced and then pushed higher during Powell's press conference which followed. From the UK it's a quiet calendar until next week's Bank of England interest rate decision. GBP/USD is currently around 1.2980. GBP/EUR is at 1.1660.

Key Movers

EUR/USD mirrored GBP/USD push higher on the back of the Fed with it regaining the 1.11 level in the aftermath of the Fed. Attention now turns to the European Central Bank's interest rate decision due this lunchtime. Like the Fed the ECB is predicted to raise rates by 0.25% however the messaging from ECB Chief, Christine Lagarde will be the key area of interest. With recent data indicating the EU economy is currently flatlining at best markets will be looking for clues as to whether Lagarde will be looking to raise rates again in September or that they may be held at 4.25%. Today another event of note is the first reading of the US second quarter GDP which is due at 1:30 pm. An annualized rate of growth of 1.8% is eyed for the world's largest economy. EUR/USD is currently at 1.1130.

Expected Ranges

  • GBP/USD: 1.2900 - 1.3070 ▲
  • GBP/EUR: 1.1615 - 1.1745 ▼
  • GBP/AUD: 1.8960 - 1.9115 ▼
  • EUR/USD: 1.1050 - 1.1200 ▲