Yesterday’s FOMC meeting minutes from The Federal Reserve brought further strength to The USD, as we saw both GBP & EUR lose ground by 0.5%. After the last rate hike it looked like The Federal Reserve would slowly bring their rate hikes to a pause in order to fully analyse where inflation actually is. But the narrative has changed and now it looks certain that The Federal Reserve will continue to hike rates until there are more substantial signs of inflation slowing down. Markets are now anticipating that The Federal Reserve will hike rates in March, May and potentially even June. 3 consecutive hikes by The Fed would put their rates around the 5.5% mark, which is notably higher than the projected 5% back in December 2022.
The change of tone by The Federal Reserve has been forced notably by surprisingly strong economic data, including extremely positive jobs data in January as well as a strong Retail Sales release which suggests more hikes are needed to dent the strength in their economy.
Sticking with The U.S, we have their GDP Growth figures released at 1:30 this afternoon and although it looks like the economy has slowed slightly in the last quarter, any movement upwards could spring more volatility for clients exposed to USD purchases. We end the day with weekly jobless and continuing claims, which both will play an important part for The Federal Reserve when contemplating any future rate decisions. It’s also important to note that we may not see massive unemployment figures in The U.S until the next 8 weeks or so as individuals decide whether to claim benefits immediately after job losses or whether they simply look for other jobs before doing so.