To sum up, yesterday’s FOMC announcement was hawkish enough to keep the U.S. dollar on a strong footing, even though big market movements were lacking. In terms of a first rate hike, Federal Reserve officials are now evenly split on whether or not it will be appropriate to begin raising rates as soon as next year. The market continued to price in a first hike around the start of 2023, an assumption that can be considered less hawkish and which has led to a very small sell-off in the greenback at the time when projections were released.
The dollar gained back ground around the time of the press conference with Fed Chair Jerome Powell saying the central bank could begin scaling back asset purchases in November and complete the process by mid-2022. This was the hint on tapering the market has expected.
As for fears over an economic collapse in China, Powell spoke on the Evergrande situation during his press conference but he does not expect any spillover into global markets. Market participants will now be looking to see if Evergrande makes its next debt payment which totals $83.5 million.
The next central bank decision is around the corner with the Bank of England monetary policy announcement due at 11:00 UTC today.
While risks are tilted for a hawkish outcome for the BoE meeting, there is a concern that markets may be overly optimistic amid the recent increase in rate hike calls by analysts. A rate increase is seen by May 22.
In the GBP/USD we continue to look at a price range between 1.39 and 1.3550 and bear in mind that the pair is still oversold making it vulnerable for corrections.
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