The U.S. Dollar continues its dominance over all peers across the board ahead of a much-awaited Fed policy decision meeting.
Overview
As of yesterday afternoon, there is a 21.0% chance per traders’ bets that the Federal Reserve will hike in a more aggressive way than expected and make a 100-basis-points move that would make the Federal Funds Rate stand at 3.5%. We believe the Fed will not try to deviate from their telegraphed path of gradual 50-75 bps increments, but the key will be in the details of the press conference and the tone as well as mood Chairman Jerome Powell displays.In terms of global matters not directly involved with borrowing costs, Russia’s leader Vladimir Putin announced that his forces will engage in more contentious fighting as he is willing to use “all means necessary” in the invasion of Ukraine. A variety of reports are painting a picture in which Ukraine’s advances in defending its territory and taking it back are forcing a more desperate effort from Russia’s war machine that will include declaring the taken land as Russian so that Putin can effectively use nuclear weaponry in “national self-defense.”
Clearly, the conflict will only get more serious, and this reveals no willingness to discuss much in terms of a cease-fire much less peace. For now, all items look very dollar positive.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇓
As mentioned above, the shared currency is definitely in the spotlight as the region overall braces itself for escalation in the Eastern front. The energy crisis is defining a lot of the struggles and fears on outlooks, but now there has to be growing concern about Putin’s ambition to use an even more intense launch of the attack.
Per estimates, Ukraine has been able to take back about 10.0% of the territory Russia invaded. Putin’s warnings must be taken seriously and unfortunately dampen the prospects for Euro re-strengthening we had foreseen. Surprises, volatility, anything can happen, but the war is a chokehold on anything related to European growth.
GBP ⇓
Sterling has fallen to a fresh new low since 1984 as the buck keeps getting stronger based on the uncertainty elsewhere other than the geographically isolated U.S. landmass. The Bank of England is expected to also raise interest rates tomorrow, but the more likely chance for Pound guidance will come on Friday as new Prime Minister Liz Truss introduces her budget plans.
Expect a lot more in terms of GBP-related volatility with the U.K. more vulnerable than ever.
