After Hawkish Fed Focus Shifts To BoE

As expected, the Federal Reserve kept interest rates unchanged at 5.25%-5.5% and left the door open for one more rate hike before the end of the year. The Summary of Economic Projections showed 50bp fewer rate cuts in 2024 than previously indicated. The Fed sees just two rate cuts next year which would put the funds rate around 5.1 percent.

The U.S. dollar rose in the aftermath of the Fed’s hawkish rhetoric and pushed both euro and pound sterling lower in turn.

This morning we see GBP/USD trading around 1.23. Below 1.2270 we expect further losses.

The focus today shifts to the Bank of England rate decision (due 13:00 UTC) while the BoE could go either way. Previous expectations were firmly in favor of another 25bp rate hike today but yesterday’s U.K. Consumer Price Index showed softening inflationary pressures which is why market pricing significantly shifts towards a rate pause now. However, according to a statement from UK Chancellor Hunt saying that “Inflation is still too high” and “It’s all the more important to stick to our plan to halve inflation”. In other words, a BoE 25bp rate hike is still well in the cards.

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Our trading ideas for today 21/9/23:

GBP/USD

Long @ 1.2380

Short @ 1.2290

Settings for all trades today: Entries from 8:00 am UTC, SL 25, TP 40

Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.

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