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US dollar falls as Fed rules out 75bps hike

currency-newsUS dollar falls as Fed rules out 75bps hike
The US dollar retreated on Wednesday as markets reacted to the Federal Reserve’s latest interest rate decision.

Meanwhile, the pound opens this week on the back foot, with GBP/EUR slipping to €1.1834 and GBP/USD tumbling to $1.2533. GBP/CAD has retreated to C$1.5986, while GBP/AUD and GBP/NZD hold steady at AU$1.7372 and NZ$1.9262, respectively.

In the spotlight today will be the Bank of England’s (BoE) interest rate decision. Will a dovish rate hike place additional pressure on Sterling?
 

What’s been happening?

The US dollar fell back yesterday in response to the Fed’s interest rate decision.

While the US central bank raised rates by 50 basis points as expected, USD investors were disappointed as Fed Chair Jerome Powell dismissed suggestions the Fed may pursue a 75bps hike in June.

The euro, meanwhile, initially stumbled on Wednesday as EUR investors were unnerved by the EU’s proposal to ban Russian oil imports.

In spite of the subsequent release of lacklustre retail sales figures from the Eurozone, EUR exchange rates bounced back in the second half of the European trading session.

At the same time, the pound was left subdued through yesterday’s session as GBP investors were reluctant to make any bullish bets ahead of the Bank of England’s (BoE) latest interest rate decision.


What’s coming up?

Centre stage today will undoubtedly be the BoE’s interest rate decision.

With a 25bps rate hike largely priced in by markets the focus will primarily be on the BoE’s forward guidance. A dovish outlook from the bank is likely to push the pound lower.

There is also the outside possibility that the BoE opts to leave its monetary policy unchanged this month in a move which could prompt a dramatic slump in GBP exchange rates.

In the meantime, the release of Germany’s latest factory orders figures could put the euro on the defensive today, after reporting a much larger-than-expected contraction in order growth in March.

Finally, a cautious mood could help the US dollar recoup some of Wednesday’s losses today.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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