Investors expect the Fed to raise rates by 50 basis points at its Tuesday-Wednesday meeting. Now the concerns lie with Jerome Powell's hawkish stance in comments following the decision. Markets are pricing in an aggressive series of rate hikes from the Fed as it tries to rein in runaway inflation.
A survey on Monday also showed eurozone manufacturing output growth stagnated in April as factories struggled to source raw materials, while demand was hit by sharp price rises and concerns about the economic outlook.
The vice-president of the ECB, Luis de Guindos, expressed himself in an interview granted to the Spanish newspaper El Correo this weekend, making slightly hawkish remarks which did not convince the market as to the ECB's desire to rapidly tighten its policy. He stated that interest rates will rise, but this could happen in "months, weeks or days", not ruling out an ECB rate hike as early as the summer. Highlighting "a significant weakening of growth", De Guindos specified the decisions taken by the ECB "will depend on the data and the new macroeconomic projections of June". The euro was also not helped by surprisingly weak German retail sales data for March, with the first full monthly data reflecting the impact of the war in Ukraine on consumer confidence in the region. Retail sales fell 0.1% for the month and 2.7% for the year, with new plans to ban Russian oil imports announced this morning by the EU.
Cable continued going down on Tuesday amidst a stronger Dollar and ahead of the Fed’s announcements.
GBPUSD was able to open at 1.2559 and close slightly under 1.24850.
GBPEUR recorded a loss yesterday. The pair opened at 1.1934 and closed at 1.1871.
EURUSD followed a similar trend with the pair opening at 1.0568 and closing at 1.0518.