All eyes are on the FOMC later today.
A 25bp rate hike is nailed on so the focus will be on what Chair Powell has to say, both in the statement and his press conference.
Hawkish rhetoric is expected in line with the consistent Fedspeak we have heard from numerous officials.
While markets are betting on a pause and rate cuts towards the end of the year, a steadfast Powell could give a lift to the beaten down dollar and hurt January’s impressive risk rally seen in the likes of gold, stocks, and even cryptos.
The greenback fell over 1.38% last month, marking four consecutive monthly declines.
The DXY has found some support around 101.30 which also halted the DXY’s end-May 2022 declines. Is this the forming of a base before a rebound or simply bearish consolidation before another leg lower?
Much of the DXY’s near-term fate is set to be dictated by the Fed’s incoming policy clues.
ECB keen to tame inflation
Thursday’s central bank meetings also see the ECB and Bank of England both raising rates by 50bps.
But the similarity could end there as the ECB is likely to remain hawkish in the face of record high core inflation which is proving sticky.
Attention during the ECB meeting will be on what happens in March and beyond with the euro currently looking well supported.
Dips in EUR/USD have been bought with yesterday being a classic example.
Prices fell very close to 1.08, finding support at its 21-day SMA before buyers stepped in and pushed the major to close above 1.0860.
The broader trend remains for higher prices from a technical viewpoint with many citing 1.10 as EURUSD’s the upside target.
But first, the 50% Fibonacci retracement level from EURUSD’s long-term downtrend has to be conquered as immediate resistance.
BoE “Super Thursday” and updated forecasts
Finally, the Bank of England is expected to deliver another half-point rate rise, although this is a closer call among watchers of the Old Lady.
It’s a “Super Thursday” so the bank will update its growth and inflation forecasts.
A steeper than expected cut in the latter could mean a sooner-than-expected end to the bank’s tightening cycle and likely weigh on GBP.
Near-term support sits at last week’s low of 1.22632, while the 50-day simple moving average lays further south at 1.21867 for now.