The US dollar index is holding near 102.00. Today Powell will appear before Congress with his semiannual testimony. We expect the head of the Fed to repeat the rhetoric that we heard last week following the results of the regulator’s meeting. It is worth noting that the majority of Fed members now support the idea of two more rate hikes before the end of this year. However, the US rate market does not believe that the Fed will raise the rate twice, and currently estimates the probability of a further rate hike in September at only 20%. In other words, the Fed’s policy will be less tight, which could create conditions for a weakening of the dollar.
SELL STOP 102.00/TP 101.40/SL 102.20
EUR/USD
The EUR/USD pair is trading near 1.0900. The European Central Bank (ECB) last week raised its key interest rate to 4%, and also admitted the possibility of further tightening of national monetary policy at the next meetings. The ECB’s intention to continue raising rates has been previously confirmed by ECB Chief Economist Philip Lane and ECB Governing Council member Isabelle Schnabel. In their opinion, the regulator has to do a lot of work before inflation stabilizes near 2%. Meanwhile, data released on Friday showed that annual inflation in the Eurozone remained at 6.1%, while the core consumer price index stood at 5.3%. Against this background, the EUR/USD pair retains the potential for growth.
BUY STOP 1.0930/TP 1.1010/SL 1.0900
GBP/USD
The GBP/USD pair is trading near 1.2770. The UK CPI data for May will be released today. The consumer price index is expected to remain above 8%, while core inflation is expected at 6.8%. If expectations are confirmed, the Bank of England will raise interest rates at the meeting on Thursday. Bloomberg analysts predict that at the peak the BOE rate could reach 6%, which will be the highest level among advanced economies. It is worth noting that the Bank of England may tighten policy without thinking about the consequences of a recession, as high inflation remains the main problem for the British economy. Against this background, we recommend holding long positions on the pound.
BUY STOP 1.2800/TP 1.2900/SL 1.2770