Is Fed’s Rate-Hike-Pause A Done Deal?

U.S. inflations figures came in as expected, providing room for the Federal Reserve’s wait-and-see approach. There is a 90 percent probability that rates will be put on hold at today’s FOMC decision. Further expectations lean towards a 25bp rate hike in July. Since a rate-pause scenario this month is largely priced in, more focus will be on the monetary policy guidance and fresh economic projections to determine what comes next. If terminal rate projections and inflation estimates are revised higher, it would reignite hawkish concerns and thus, support the U.S. dollar.

The Fed rate decision alongside economic projections is due to be released today at 18:00 UTC, followed by the press conference 30 minutes later.

GBP/USD: The pair trended higher, heading towards 1.2650. As mentioned in Monday’s analysis, we will keep tabs on a bullish breakout above 1.2670.

EUR/USD: The euro swiftly rose above 1.08 but was unable to hold above that benchmark – at least for now. We expect increased volatility around the FOMC decision and watch out for price breaks either above 1.0835 or below 1.07.

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