Things to watch out for at the Fed meeting; EUR / GBP, the pound confirms its bearish channel

Key points of the article:

• What to watch out for at the Fed meeting?
• Euro pound fails to break out of its bearish channel

Currency Table-Time Horizon: Daily

What to watch out for at the Fed meeting?

The dollar maintained its recent gains in the Asian session this morning, with investors now looking to a key Federal Reserve policy meeting to see if it will bolster growing market expectations for a rate hike next year. .

LInvestors will examine two essential points:

1-How quickly will the Fed withdraw its asset buybacks?

Currently, the Fed is on track to cut asset purchases by $ 15 billion per month. Markets expect the Fed to double that amount to $ 25-30 billion, and anything less could cause the US dollar to fall. The larger the monthly cut, the more bullish it is against the dollar.

2-How much rate hike for next year?

In September, when it was last forecast, only one rate hike was scheduled for next year. Nine out of eighteen members predicted a rate hike in 2022. With inflation nearing its highest level in four decades, more than half of US policymakers will support a hike next year, and a growing number of they will consider a tightening of 50 basis points. The US dollar could react higher if more than half of the Fed’s members predict two rate hikes next year.

Finally, these forecasts for rate hikes will depend on economic expectations. Inflation forecasts could be revised upwards, but as growth peaks before Omicron, their GDP forecasts could be revised downwards.

It is certain that the markets are anticipating a sharp tightening of Fed policy that is being heard after Powell’s latest turnaround. Any disappointment would undoubtedly lead to a fall in the dollar.

In Great Britain tomorrow, the members of the Bank of England will have something to debate. Inflation this morning came out much stronger than expected at 5.1% against 4.7% but the country is facing a “tidal wave” of the omicron variant according to its prime minister, which could derail growth .

Euro pound fails to break out of its bearish channel

Inflation figures released this morning strengthen the pound. The euro against the pound has been moving in a downward channel since early May.

The upper bound test on Wednesday failed. Prices retreat to an intermediate support at 0.8485. The break of this threshold would give the signal for a pursuit towards the lower limit of the channel currently on 0.8375.

The upper channel exit will need to be confirmed by breaking through the strong resistance zone above at .8660 to reverse the trend.

Evolution of the euro against the pound in daily data:

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