News & Analysis

After a few weeks of subdued volatility, markets quickly snapped back into life this week after the Federal Reserve conducted a hawkish twist at their policy meeting, with the interest rate projections now showing a median forecast of 2 rate hikes in 2023. This caught markets by surprise as the consensus was for no change or a singular 25bps hike being signalled, however, the FOMC became more confident in their economic forecasts since March and equated this with the need for higher rates. The dollar bounced back as FX markets awoke to the idea of earlier policy normalisation from the Federal Reserve, with most expanded majors sustaining losses in excess of a percentage point over the week against the greenback. The focus next week will now be on the US data and whether that can live up to the expectations set by the Federal Reserve, while a few FOMC speakers will provide markets with a bit more clarity on their position on the economic outlook.

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Authors:
Simon Harvey, Senior FX Market Analyst
Olivia Alvarez Mendez, FX Market Analyst
Ima Sammani, FX Market Analyst

 

 

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