Will the EUR/USD Swing Around if the ECB Hikes as Expected?

Even though the Federal Open Market Committee (FOMC) increased the target rate by 25 basis points (bp), as was largely expected, the US dollar is under pressure today.Although the action is unmistakably a tightening of policy, Fed Chair Jerome Powell’s use of the word “Disinflation” in the post-meeting press conference which seems to muddle the message.

Powell’s remarks initially looked reasonable. Most importantly, he predicted that there would not be any rate reductions this year and that proper rate hikes would continue. Although he agreed that disinflation had taken place and appreciated the relief from pricing pressure, he insisted that more needed to be done. This part of his remarks seems to have resonated with markets the most.

Market consideration of the effects of inflation, tight monetary policy, and corresponding effects on the US economy appears to be lacking at the moment.
Looking ahead, a meeting between the Bank of England and the European Central Bank is scheduled for later today. Rate increases of 50 bp for each bank are anticipated.

Relevant news