Investors are Convinced the Fed would Lif Rates 3 times in 2022
U.S. President Joe Biden wasted no time in announcing his nomination of Jerome Powell as the Federal Reserve (Fed) Chairman for a second term. The U.S. Dollar gained more momentum on this news as the market considers the monetary policy will be tightening much faster under Powell’s control.
As I have said before, I expect the U.S. Dollar index to continue climbing as it is guided by the upward channel that started on May 26.
However, the index has managed to overshoot above the upper margin of this channel, which means that it may accelerate up at the height of this channel, or to 97.70-97.80 points, and this could happen quite soon.
The large portion of macroeconomic statistics in the United States is going to be published on Wednesday. The Gross Domestic Product (GDP) is expected to rise by 2.2% in the Q3 quarter-on-quarter, personal spending in October is expected to rise by 1.0%m, while personal income – by 0.2%. The Michigan consumer sentiment index for November is expected to be revised to 66.8 points.
I think any figures or news at the moment should be considered from the perspective of faster interest rate hikes by the Fed as the market has already priced in three interest rate hikes in 2022.
The Euro and the British Pound remain under pressure. The EURUSD is moving within the downward trend that started at the end of May and became even stronger after the pair passed the 1.1600-1.1660 zone. The pair is trading below the 61.8% correction from its peak at 1.2350, or below 1.1291. If the Euro closes this week below this level then the risks of it moving towards its minimums at 1.0637 would increase. The nearest support levels are at 1.1175 and within the range of 1.0980-1.1000.
The Pound is falling less dramatically as the Euro. GBPUSD is close to the 1.3365 level and is moving within the semi-annual downward channel with the lower margin at 1.3250-1.3260. The recent actions, or better to say inactions of the Bank of England (BoE), have disappointed investors. However, investors still expect the BoE to decide to raise interest rates by 0.25% at its meeting on December 16. Before that the Pound may show persistence to downward pressure. If these expectations are not met the Pound may easily catch up to the Euro within a single day. A breakthrough below 1.3250 may plunge the Pound to 1.2950-1.3000.
As I have said before, I expect the U.S. Dollar index to continue climbing as it is guided by the upward channel that started on May 26.
However, the index has managed to overshoot above the upper margin of this channel, which means that it may accelerate up at the height of this channel, or to 97.70-97.80 points, and this could happen quite soon.
The large portion of macroeconomic statistics in the United States is going to be published on Wednesday. The Gross Domestic Product (GDP) is expected to rise by 2.2% in the Q3 quarter-on-quarter, personal spending in October is expected to rise by 1.0%m, while personal income – by 0.2%. The Michigan consumer sentiment index for November is expected to be revised to 66.8 points.
I think any figures or news at the moment should be considered from the perspective of faster interest rate hikes by the Fed as the market has already priced in three interest rate hikes in 2022.
The Euro and the British Pound remain under pressure. The EURUSD is moving within the downward trend that started at the end of May and became even stronger after the pair passed the 1.1600-1.1660 zone. The pair is trading below the 61.8% correction from its peak at 1.2350, or below 1.1291. If the Euro closes this week below this level then the risks of it moving towards its minimums at 1.0637 would increase. The nearest support levels are at 1.1175 and within the range of 1.0980-1.1000.
The Pound is falling less dramatically as the Euro. GBPUSD is close to the 1.3365 level and is moving within the semi-annual downward channel with the lower margin at 1.3250-1.3260. The recent actions, or better to say inactions of the Bank of England (BoE), have disappointed investors. However, investors still expect the BoE to decide to raise interest rates by 0.25% at its meeting on December 16. Before that the Pound may show persistence to downward pressure. If these expectations are not met the Pound may easily catch up to the Euro within a single day. A breakthrough below 1.3250 may plunge the Pound to 1.2950-1.3000.
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