- GBP/USD rises after the Fed’s “moderate” rate hike of 75 basis points.
- Fed Chairman Powell opened the door for “another exceptional” rate hike at subsequent meetings.
- GBP/USD rose over 160 pips and reached a daily high of 1.2185 before falling back to current levels.
The GBP extended its gains on Wednesday, after the Federal Reserve raised interest rates by 75 basis points, which raised the Federal Funds Rate (FFR) to 2.50%. The central bank admitted that output and spending slowed, which was perceived by investors as a slightly “moderate” tilt, without mentioning the word “recession”. At the time of this writing, the pair GBP/USD It trades at 1.2166, up 1.12%.
Some comments from Fed Chairman Powell’s press conference
In his press conference, Fed Chairman Jerome Powell said that although commodity prices have softened, there are still upward inflationary pressures. He added that “exceptionally” another rate hike might be appropriate, while he said that “we are looking for convincing evidence that inflation is coming down” in the coming months.
Jerome Powell added that the central bank will decide monetary policy “meeting by meeting” and will not provide forward guidance as before. Powell said the FOMC sees rate hikes in 2023, adding that the board has not decided when to stop rate hikes.
FOMC Monetary Policy Statement Summary
In their monetary policy statement, Fed officials mentioned spending and output have “softened” but simultaneously said the labor market is robust. The US central bank noted that inflation remains elevated and has widened further, stressing that the Fed is “firmly committed to returning inflation to its 2% target.”
Meanwhile, policymakers anticipated that further rate hikes would be “appropriate,” adding that balance sheet reduction would continue as envisioned in the Fed’s Balance Sheet Reduction Plans, published in May.
GBP/USD Market reaction
GBP/USD hovered around 1.2029-88 but recovered once Federal Reserve chief Jerome Powell took the stand. GBP/USD rose from 1.2029 to 1.2185 for a 160 pip move higher, which is close to the 50 day EMA around 1.2232.
Key technical levels
Source: Fx Street
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