A softer approach from The Fed Reserve from September for rate hikes has seen the USD lose further ground over night against a number of different currencies. The minutes from The Fed Reserves last meeting are suggesting a possible pause in rate hikes after 2 more 50 bps hikes in both June & July, effectively allowing the central bank time to assess how the economy has performed with rates being aggressively hiked. Inflationary pressures are still coming from the lockdowns in both Shanghai & Beijing as well as the continued pressure from the Russia/Ukraine war. All of this has led to The Fed Reserve feeling some concern for supply chain disruptions, initially first felt when lockdown struck in 2020, as well as a potential struggle in the jobs market with pressure on wages still set to continue.
More importantly however, all Fed Reserve members voted for 50 bps hikes so it’s pretty much set in stone for 2 more 50 bps hikes in June & July. Income, spending and Non-Farm Payroll data releases over the next week will no doubt influence The Fed Reserve and it’s members on the decision to potentially pause rate hikes later this year.
Elsewhere this week, we’ve seen Christine Lagarde of The ECB outline a path for The European Union to start raising their Interest Rates in July with the aim to move out of negative rates by September. Momentum over the past week has increased with certain policy members suggesting a 50 bps hike if needed, however Lagarde is seemingly targeting incremental hikes of 25 bps in both July & September. This news saw EUR/USD hit a one-month high of 1.0748, and is currently trading just below the 1.07 area.