- GBP/USD rises on the Fed with a relatively dovish response from financial markets.
- The Fed raised rates by 50 basis points and published plans to reduce the size of the balance sheet.
At 1.2522, the GBP/USD it is 0.22% higher and has risen about 42 pips in the first 15 minutes on instinct after the Fed hiked rates by 50 basis points. The Fed’s target range is located at 0.75%-1.00%.
The hike was aggressive and Fed futures are pricing in a higher probability of a 50bp hike at the June meeting 77% on a 50bp price and 23% on a 75bp rise. Interest rate futures also suggest a 94% chance of an effective fed funds rate of at least 2.75% by the end of the year.
The Fed anticipates that continued increases in the target range will be appropriate as central banks are keenly aware of inflation risks.
However, the US dollar has come under pressure from the release, which has boosted the British pound.
GBP/USD technical analysis
In the announcements, GBP/USD consolidated:
The result has done little to change the structure. In the longer term, GBP/USD has been positioned for a downside extension after a brief bullish correction on the daily chart as follows:
If the bulls fail to break past the resistance, the mounting bearish pressure will likely lead to a continuation to the downside in due course.
Source: Fx Street
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