Recently, the exchange rate has fluctuated due to speculation about the future pace of interest rate hikes by the US FOMC. At the FOMC meeting on the 2nd of this week, the market consensus is formed for a 75bp rate hike. The focus will be on the pace of interest rate hikes after December. As for December, views are split between 50bp and 75bp. Speculation about the level at which interest rate hikes will be halted is also circulating. Leaky tweets from Fed watchers have stoked markets, but they will likely be forgotten once the Fed’s blackout period is over. The focus now will be on Fed Chairman Jerome Powell’s view on the pace of future interest rate hikes.
If we go back to basics, it will be important to carefully check the economic data. A series of weaker-than-expected U.S. economic data over the past week has broadened expectations of a slowdown in future rate hikes. However, the latest US employment statistics and inflation indicators are stubbornly strong, and it is difficult to weaken more than market expectations. Depending on the results of these indicators, speculation of a terminal rate hike is likely to surface again.
Today, the final figures for the US manufacturing PMI (October), US construction spending (September), US ISM Manufacturing Index (October), etc. will be announced. The market forecast for the ISM manufacturing index is at 50.0, a level at which business sentiment is at a crossroads. It is expected to decline from the previous 50.9. It seems likely that the impression given by the market will change considerably depending on whether the result falls below 50 or not.
Regarding the remarks event, the Bank of England will start selling its holdings of government bonds. It is a symbolic event that shows that the market turmoil during the previous Truss administration has finally been brought under control. The UK Monetary Policy Committee (MPC) will announce the policy interest rate on the 3rd of this week. Market expectations are almost unified at 75bp. With today’s event ahead, the pound’s own price movements are likely to be sealed.
After the US ISM manufacturing index at 23:00, we assume that the USD will move significantly again. The place where I want to ride again on the movement after this.
