At yesterday’s US FOMC meeting, the interest rate was raised by 25bp as expected. At the press conference of FRB Chairman Powell, he showed a conventional attitude of suppressing inflation, continued to raise interest rates in the future, and showed a sense of caution against premature easing. However, it was in the early stages of declining inflation and welcomed the progress of lower inflation as the labor market remained strong. The market, which saw the hawkish tone weakened somewhat, proceeded with dollar selling.
Next is today’s monetary policy announcements by the Bank of England Monetary Policy Committee (MPC) and the ECB Governing Council. The Bank of England is one of the first central bank groups to begin raising interest rates, and the degree of maturity in the process of raising interest rates is different from that of the ECB, which started later. A 50 basis point hike is expected this time. However, the number of rate hikes that will continue in the future is likely to be limited compared to the ECB. Amid fears of an economic recession, it is expected that inflation will slow down rapidly from around spring. Today is Super Thursday, with economic forecasts and a press conference with Bank of England Governor Bailey. We would like to pay attention to whether the possibility of slowing down the target of rate hikes is suggested in the future. The lack of votes among committee members and the outlook for growth and inflation are likely to give hints.
In response, the ECB Governing Council also expects a 50bp rate hike. However, the rate hike process is likely to continue for some time, as ECB President Christine Lagarde has suggested multiple 50 basis point hikes are possible. Some reports said the Fed had mentioned 50 basis points multiple times to quell opposition from hawkish members calling for a 75 basis point hike. Opinions are common in the euro zone, given the large number of participating members. The fact that there are differences in economic trends and inflation trends in each country makes it difficult to make policy decisions. The latest inflation indicators point to a slowdown in inflation growth across the eurozone, but the core index remains elevated. In particular, the market was paying attention to the sharp rise in Spain’s core y-o-y increase of +7.5%.
Assuming the above situation, it seems likely that the euro will become easier to buy against both the dollar and the pound. I would like to pay attention to whether the flow of the euro’s unrivaled high will start.
Based on the reactions after the FOMC meeting, we assume that the USD will continue to sell for the time being.
There will be an ECB Governing Council meeting later today, so we expect price movements to become even more active.
The current position is only buying AUDUSD.