Yesterday, the highly anticipated FOMC meeting and Powell’s press conference took place. While the decision to keep rates unchanged was in line with market consensus, all eyes were on Chairman Powell’s hawkishness. His clear denial of any expectations for a March rate cut led to a surge in the dollar. However, the dollar initially saw selling pressure due to factors such as the ADP employment report coming in below expectations and a decline in the labor cost index. In the end, the dollar index still seems unable to break free from the confusion it experienced in January.
Today, the Bank of England (BOE) Monetary Policy Committee (MPC) decision will be announced. It’s known as “Super Thursday,” with quarterly economic forecasts and a press conference by Governor Bailey also scheduled. Recent inflation data has shown signs of easing, and there is likely to be caution against early rate cuts. Governor Bailey is known for his aversion to market overreaction. However, it is unlikely that there will be any change in the basic assumption that inflation has peaked, at least for the time being. Central banks worldwide are likely to exercise patience, and it will be interesting to see if there are any changes in the quarterly inflation forecasts. Even if there is a sudden change in the pound’s exchange rate, questions may arise about its sustainability.
In addition to the BOE monetary policy-related events mentioned above, economic indicators to be announced in the global markets include the U.S. Manufacturing PMI final reading for January, the U.S. ISM Manufacturing Purchasing Managers’ Index for January, and more. Also, the DMP inflation rate forecast for January, conducted by the BOE, will be released at a later time than usual after the MPC announcement.
Regarding speaking events, apart from Governor Bailey’s BOE press conference, there are events featuring officials such as Centeno, Governor of the Bank of Portugal, and Lane, Chief Economist of the ECB. Notable earnings reports from major U.S. companies include Apple, Meta Platforms, Amazon.com, and Merck.
Following the FOMC meeting, the USD strengthened significantly as expectations for a March rate cut were firmly denied, despite some initial selling pressure. While inflation remains in check, the U.S. economy is robust, reducing the urgency for rate cuts. The situation seems favorable for further USD buying.
Today’s focus is on the U.S. ISM Manufacturing Purchasing Managers’ Index, and the USD’s movement after this release will be closely monitored.