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Table of contents

  1. Powell was not objectively dovish
    1. The 25 basis point hike
      1. Powell
        1.  EUR/USD
          1. GBP/USD

            Euro rose above 1.1000 after the Fed signaled a change in their stance on monetary policy. Their statements during yesterday's meeting were more dovish compared to December, with interest rates increasing by only 25 basis points to a range of 4.5%-4.75%.

            powell admitted that the us economy is mow in an era of disinflation grafika numer 1

            Powell was not objectively dovish

            At first, markets did not react much to the news as everyone was waiting for the speech of Jerome Powell. But when the Fed Chairman confirmed that they will no longer be aggressive in terms of interest rates, risk appetite surged. The decision was kind of in line with what everyone was expecting, that is, a more optimistic view of inflation and the economy. Of course, Powell was not objectively dovish, but neither was he overly hawkish, which was enough for the market.

            Speaking to reporters on Wednesday, Powell said they are forecasting "a couple more" rate hikes, but are ready to adjust their plans if price pressures eased faster than expected. When asked about easing conditions in financial markets that could complicate the central bank's path to return to its 2.0% inflation target, he did not sound particularly concerned.

            The 25 basis point hike

            The 25 basis point hike that was made yesterday was another step towards policy normalization after a half-point rate hike in December and four giant hikes of 75 basis points before that. Most likely, the soft inflation data in recent months has been persuasive enough for the Fed to consider suspending their rate hike campaign. Although the committee continues to cite high prices, the hint of two more 25 basis point hikes confirms market expectations of a final rate hike of 5.25%.

            powell admitted that the us economy is mow in an era of disinflation grafika numer 2

            Powell

            During the press conference, Powell admitted that the US economy is now in an era of disinflation with cooling price pressures. He stressed that more data is needed before they can declare victory, but did not specify how much they need to ensure that inflation is on the right track.

             EUR/USD

            In terms of the forex market, demand for euro surged, but buyers need to protect 1.1000 in order to maintain the chance of rising above 1.1050. Possible price levels in such a situation are 1.1090 and 1.1125. In the event of a decline, EUR/USD could move below 1.1000 and head towards 1.0960 and 1.0920.

            GBP/USD

            For GBP/USD, the sideways trend persists, so buyers need to return above 1.2420 to regain their advantage. Only the breakdown of this resistance level will strengthen the hope of a rise towards 1.2470, after which it will be possible for the pair to reach 1.2540. If pressure returns and sellers take control of 1.2350, the pair will fall to 1.2290 and 1.2230.

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            Relevance up to 08:00 2023-02-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

            Read more: https://www.instaforex.eu/forex_analysis/333996


            Jakub Novak

            Jakub Novak

            Analytical expert of InstaForex

            Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.


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