Good afternoon,

Yesterday Federal Reserve Chair, Jerome Powell, took centre stage as the US central bank outlined their view on the economy moving forward. In a hawkish update on market outlook, the US dollar has gained across the board as Jay Powell hinted at interest rate hikes throughout the course of the calendar year ahead, despite not making the move this month. The stronger dollar is now dominating markets with cable currently trading at 1.3422 and EUR/USD sitting at 1.1192. Looking back on the chart, you would have to go back one month to see GBP/USD trading around these rates. With inflation rising to 7% in the US, interest rates have been a hot topic across the pond.

At the start of the pandemic, The Fed, like many other central banks, drastically acted to encourage spending and make purchases of assets to supply the market with funds in an attempt to ward off any financial shocks. The Fed committee signed off on a final round of asset purchases before bringing the programme to an end in March. Traders are now expecting up to 5 rate rises throughout the course of 2022, leaving the dollar in a strong position heading into February.

Have a great day.

Author: Jack Nicholls, Senior Relationship Manager.


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