GBP/USD: Could Today's Economic Data Finally Provide the Breakout Traders Expect?
In recent days, the Federal Reserve's messages have been anything but consistent, leaving investors in a quandary when it comes to predicting the US dollar-related currency pairs' movements. Earlier this week, a series of dovish statements from Fed members led to a dip in the probability of interest rate hikes, giving some support to the US dollar, which has been in a correction phase.
However, this sentiment shifted yesterday when minutes revealed that a majority of board members believe that a rate hike at the next meeting is the right course of action. This stark contrast between the market's expectations and the Fed's stance creates a challenging landscape for traders.
Now, the focus turns to today's US inflation data, as both scenarios — one of holding rates and one of hiking — remain in play. Meanwhile, the Bank of England has chosen to take a break from the interest rate hike cycle, but this decision was made by a slim majority, leaving all options open.
The discrepancy between the market's assessment of the likelihood of an interest rate hike at the upcoming meeting and the statements from Fed members is evident, with a marked difference between the Fed dot plots and federal funds rate futures.
Despite the ongoing restrictive monetary policy characterized by quantitative tightening and relatively high interest rates, there remains a notable divergence between the market and US stock indexes.
The stock market continues its upward trend without showing signs of a significant downturn. Historically, deeper declines tend to occur only after the announcement of a major policy shift, which typically precedes a period of economic recession.
In terms of the US dollar's performance, it has shown a higher level of
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