Trading Profits And A Hawkish Takeaway

It came as expected, but with a hawkish takeaway. The Federal Reserve paused rate hikes in June after 15 months of interest rate increases but there is less conviction for markets now that yesterday’s decision will mark the end of its tightening cycle. The Federal Open Market Committee stated that this month’s pause aims to allow the officials to assess more incoming data and Powell added that nearly all FOMC officials expect ‘some’ further rate hikes. Additionally, the dot plot peak rate for 2023 revised to 5.6 percent form previous 5.1 percent, which suggests another 50bp tightening by the end of this year.

The U.S. dollar gained following the more hawkish dot plot projections and thus, corrected recent gains in the EUR/USD and GBP/USD.

Our yesterday’s signal entries have proved highly profitable with two long entries in both pairs, providing only yesterday +64 pips in the EUR/USD and +80 pips in the GBP/USD.

Today, we will have the European Central Bank decision due at 12:15 UTC followed by the ECB press conference. It is expected that officials will raise rates by 25bp but may signal on a dovish guidance.

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