- GBP/USD corrects vertically from 1.2335 as Fed Powell denies rate cuts this year.
- US Yellen commented that they are not considering insuring all uninsured bank deposits.
- Going forward, the interest rate decision by the BoE will be keenly watched.
The GBP/USD pair has surrendered the majority of its gains generated after the Federal Reserve (Fed) announced a 25 basis point (bp) rate hike to 4.75-5.00% in its monetary policy meeting. The Cable has dropped vertically after printing a fresh six-week high at 1.2335 as Fed chair Jerome Powell has cleared that the central bank is not expecting any rate cut this year.
The main agenda of the Fed that inflation has to bring down to the desired rate of 2% is intact and the central bank would do ‘whatever it takes’ required for the same. Fed Powell has cleared, "Recent liquidity provision for rescuing the collapse of commercial banks that has increased balance sheet size is not intended to alter the stance of monetary policy."
Meanwhile, S&P500 has surrendered its entire gains delivered on Tuesday after Fed Powell cleared that rate cuts are not in pipeline at least this year. This has strengthened the fears of a recession in the United States. Apart from that, commentary from US Treasury Secretary Janet Yellen that they are not considering insuring all uninsured bank deposits has spooked market sentiment further. The statement came contradictory as she stated on Tuesday that the administration will safeguard all deposits.
The US Dollar Index (DXY) has shown some recovery after dropping to near 102.00 as hopes of rate cuts have faded well. The USD Index has recovered to near 102.60 and a volatility contraction is expected ahead.
On the United Kingdom front, investors are awaiting the interest rate decision by the Bank of England (BoE) for fresh impetus. A surprise rise in the UK inflation released on Wednesday has bolstered the need of more rate hikes from the BoE. Analysts at UOB are of the view that BoE Governor Andrew Bailey would hike rates further by 25 bps.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.