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14.06.202310:46 Forex Analysis & Reviews: Markets could halt rally if the Fed announces further interest rate hikes

Positive market sentiment rose as consumer inflation in the US continued to decline. Reportedly, the consumer price index fell from 4.9% to 4.0% y/y and dipped from 0.4% to 0.1% m/m. These numbers dealt a noticeable impact on investors, reinforcing their hopes that the Fed would pause its interest rate hikes.

However, only moderate growth could be seen in US and Europe stock indices due to the relatively high risk that the Fed may raise the key interest rate despite the decline in inflation as the index remains above the target level of 2%. Robust labor market conditions, as indicated by the latest data on new job numbers, and the continued balancing of the economy on the brink of a recession, could also prompt the Fed to make a final decisive strike against inflation by raising the benchmark interest rate by 0.25% to 5.50% at today's meeting.

No rate increase and hints from Fed Chairman Jerome Powell about the potential end of the rate hike cycle will stimulate risk appetite. In this case, stock indices will rise, while Treasury yields and dollar will go down. A similar scenario may also occur in the event of a rate increase, provided that Powell suggests that the hike could be the last one.

A negative outcome can be expected if the interest rate increases and Powell does not signal an imminent end to the rate hike cycle.

Forecasts for today:

Exchange Rates 14.06.2023 analysis

Exchange Rates 14.06.2023 analysis

EUR/USD:

The pair trades slightly above the level of 1.0785. In a positive scenario, where pressure returns in dollar, the pair may first rise to 1.0860 and then continue towards 1.0915.

GBP/USD:

The pair trades confidently above the level of 1.2600. Announcements or hints of a pause in Fed rate hikes could lead to further growth in the pair, initially towards 1.2680, and then potentially to 1.2730.

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

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