Excel Currencies Blog

Economists have once again forecast correctly the path of the Fed, as the central bank raised interest rates by 25bp Wednesday evening. The phase of 'every-other-month' is in full swing with a hike in September given a chance of just 20% and November 40%. A lot can happen between now and the latter though and so the hiking path may come to a close before then.

The USD lost value after the release as it does generally when the US performs well (investors move away from the safe-haven $ and into more risky assets), which is what Fed Chair Powell said in the meeting after. The US are showing strong jobs numbers, an under control inflation rate and moderate economic growth. A soft landing is more than underway..

Yesterday afternoon, the ECB raised its interest rate by 25bp (as expected). What the market was not prepared for was the dovish forward guidance offered by ECB President Lagarde. When asked in the press conference 'does the ECB have more ground to cover', her response was "at this point in time i wouldn't say so".

Significant comments from a central bank that has been working within a steady, but aggressive hiking path for over a year. The € immediately lost over 1% across the board and will be under pressure until the BoE meeting next Thursday. This may be heightened this afternoon too depending on the outcome of German inflation.

So, it was a good week in the end for the Pound after starting it on the back-foot. The 1% jump against the Euro shouldn't be ignored, especially with the risky BoE meet just around the corner..