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BoE and FED under the spotlight amid further rate hikes

BoE and FED under the spotlight amid further rate hikes

The action on markets remained relatively subdued yesterday, as investors kept their powder dry ahead of the conclusion of the Fed monetary policy meeting last night, and the BoE today. The main pairs traded in relatively narrow ranges throughout the European session although the euro was holding a slightly firmer tone. 

The Fed announced a 50bps rate hike, but this had already been priced into the market. The central bank also stated that quantitative tightening (QT) will start in June. At the press conference, Fed Chair Powell effectively ruled out the Fed hiking by 75bps at a time over the summer months – his comments sparked somewhat of a relief rally on other markets, while the dollar moved lower on the exchanges. 

As we get started today, EUR/USD opens at $1.06, GBP/USD is operating in the lower half of the $1.25-1.26 range, having climbed above $1.26 following the Fed meeting and EUR/GBP is changing hands at the midpoint of 84-85p. 

Looking to the day ahead, it’s the Bank of England’s turn to enter the monetary policy spotlight. The market expects the BoE to raise the Bank rate by 25bps, bringing it to 1%. The BoE, which has already started QT is likely to offer guidance around the future path of rate hikes will garner attention, particularly as the UK economy is expected to slow markedly in the second half of the year.

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