Yesterday was a big day for the Dollar, with the Federal Reserve announcing their highly anticipated interest rate hike decision. The Fed announced a 0.75% rate hike, their largest hike since 1994, in a bid to tackle record breaking inflation in the States. Despite this very large rate hike, the Dollar still printed some losses, falling from its recent 20-year highs. This was mainly bought on by the Fed’s rejection of the odds of a 1% rate hike at their next meeting, disappointing investors and causing the Dollar to weaken. Looking back at today, the rate has already begun to trip up as the focus switches to the Pound for the Bank of England’s interest rate hike decision at midday. As it currently stands, investors are heavily expecting a 0.25% rate hike to be delivered. However, economists are already warning that unless the BoE announce a large increment in their rate hike of at least 0.5%, the Pound is expected to fall even further. This comes as inflation in the UK is currently perched at 9% with fears that it could reach double digits by year-end. Until this meeting commences, it is likely that the rate will stay close to its current regions. As for the Dollar, it will not have much to go on so trading for the Buck will mainly be influenced by overall market sentiment.
The Sterling-Euro rate has been rather volatile lately, with the pair falling to its lowest level since February 2021 yesterday before the Pound managed to claw back the bulk of these losses. As for today, the Pound will be in the spotlight as investors pay close attention to the Bank of England interest rate hike announcement. As it currently stands, markets are expecting a 0.25% rate hike, bringing the current interest rate to 1.25%. However, many are arguing that this is simply not enough as concerns for double digit inflation grow stronger. Should this be the case, the announcement of a 0.25% rate hike may cause the Pound to weaken and slip against its counterparts. The Euro, on the other hand, is currently dealing with fresh downwards pressure. This comes as Europe is now dealing with Russia cutting 60% of gas supplies to Germany and Italy, causing natural gas prices to jump by 30%. Despite this, losses for the Euro may be somewhat limited as markets also expect the European Central Bank to soon start delivering rate hikes. For trading today the pair will predominantly be influenced by the BoE decision expected shortly.
Morning Update published by Frank Brightman (16/06/2022)