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Fed Raises Rates by 0.5%

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What’s new?

The FOMC decided to raise the rate to 50 bps and will probably do so at the next meeting in June, but they pushed back the idea of a larger hike to 0.75%. So they hold on to the view that the supply-side inflation effect is still transitory, in short, they expect inflation to come down in the coming months, but what if is not? Then the growth will be affected by the monetary tightening and we can expect as some major banks including Goldman Sachs are predicting, a recession in 2023. This is exactly what the FED wants to avoid. Future economic data will be key to assessing FED’s action.

Dollar dips after FED decision

The dollar eased after the FED's decision to send a dovish message to the market. It is premature to say that there will be a reverse in the current bullish dollar trend as other factors weigh in favor of the greenback such as the Ukraine war and supply chain bottleneck. A lower inflation data than expected in the coming month will reinforce the FED dovish message and will confirm a trend reversal for a dollar that is currently overbought.

What’s in the pipe?

  • Bank of England rate decision and briefing, Thursday
  • OPEC+ convenes virtually for a regular meeting, Thursday
  • U.S. April jobs report, Friday

FX rates

USD/JPY @ 129.27 - bullish trend

EUR/USD @ 1.0612 - Bearish trend

GBP/USD @ 1.2564 - Bearish trend

AUD/USD @ 0.7238 - Bearish trend

USD/CNH @ 6.6270- Bullish trend

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