3 min to read
The global foreign exchange arena bore witness to substantial volatility
in the wake of the Federal Open Market Committee (FOMC) assembly and Jerome Powell's press briefing.
“In the wake of the Federal Open Market Committee (FOMC) assembly and Jerome Powell’s press briefing, the global foreign exchange arena bore witness to substantial volatility”
Within the contemporary New York foreign exchange sector, the US dollar exhibited a resurgence in vigor, propelling the USD/JPY pairing back to the formidable 148 yen threshold.
While the FOMC judiciously opted to retain policy interest rates at anticipated levels, the focus of attention converged upon the FOMC members’ meticulous interest rate forecasts, colloquially referred to as the “dot plot.” This disclosure unveiled the prospect of forthcoming rate hikes later this calendar year, projecting a bandwidth extending from 5.00% to 5.25% as the anticipated terminus for the year 2024. This juxtaposed with the June dot plot, which had prophesied a trajectory of rate reductions ranging from 4.50% to 4.75% by the end of 2024. This discernible shift towards a more hawkish stance invoked a palpable stir within the marketplace.
However, it merits noting that even amidst the most hawkish prognostications, there existed a leeway for maintaining rates unchanged in the forthcoming year, thereby affording a modicum of reassurance.
Nevertheless, as Jerome Powell, Chairman of the Federal Reserve, convened his press engagement, the greenback bore witness to a resurgence in purchase interest. Chairman Powell articulated a measured approach to monetary policy tightening, while simultaneously articulating a predisposition towards additional rate hikes. Consequently, this catalyzed an amplification in demand for the US dollar, which was further reinforced by the ascent in US Treasury yields.
The euro-dollar pairing experienced a fleeting resurgence, momentarily ascending to the 1.07 dollar threshold subsequent to the FOMC announcement, only to recede to the 1.06 dollar echelon in the aftermath of Chairman Powell’s press engagement. Concurrently, ECB official Decos, the Governor of the Bank of Spain, insinuated that the maintenance of prevailing interest rates could potentially induce deceleration in inflation toward the pre-defined target, even intimating the prospect of concluding the series of rate hikes.
A subset of analysts postulates that the euro-dollar pairing may have already embarked upon a reversal trajectory. Following its nadir since March last week, it has exhibited signs of stabilization. From a technical standpoint, a bearish sentiment endures, although the presence of robust support around the 1.06 dollar juncture suggests the plausible emergence of a short-term rebound.
The pound-dollar pairing initially garnered buying interest but subsequently reverted to its downward trajectory subsequent to the FOMC announcement. Today witnessed the release of the UK Consumer Price Index (CPI) for August, engendering a sense of solace within the purview of the Bank of England. Within the near-term financial sphere, the odds of an imminent rate hike versus the retention of prevailing rates have presently achieved equilibrium, casting tomorrow’s Bank of England Monetary Policy Committee (MPC) meeting into a state of equipoise.
The conspicuous deceleration in core inflation, notably within the domain of service inflation, alludes to the prospect that the Bank of England’s constrictive measures may be gradually manifesting positive results. Nevertheless, in light of the enduring trajectory of robust wage growth, conjectures posit that the Bank of England is improbable to defer a rate hike during the forthcoming MPC meeting. Some even advocate for a policy approach akin to the ECB, suggesting the contemplation of further rate hikes before their cessation.
Visit XM Official Website.
