Daily Forex Report 03-Nov-2022: US Dollar leaps ahead following hike, Euro gains support against GBP

Will the hawks force BoE forward once again?

As expected, the US Federal Reserve raised interest rates by 75 bps yesterday, marking the fourth straight jumbo hike in a row.

The market is starting to price in a looser policy, i.e. 25 to 50 bps, according to Daniele Antonucci, chief economist at Quintet Private Bank.

Antonucci said: “The important bit was that the central bank acknowledged the substantial cumulative monetary policy tightening and the likely further impact on the economy. These changes in the statement suggest that the Committee is probably leaning towards slowing the pace of rate hiking to 50 bps at the December meeting.”

Unsurprisingly, this propelled the greenback forward. The GBP/USD pair is currently at nine-day lows of US$1.136.

Cable gears up for today’s BoE rate decision – Source: capital.com

But it was the euro that took the hardest beating, having closed the Tuesday session 64 pips lower and dipping another 26 pip in this morning’s Asia session so far.

At US$0.978, the EUR/USD pair has returned to two-week lows.

EUR/GBP is finding more support; the pair is currently changing hands at 86.18p having closed higher yesterday.

That could change when the Bank of England announces its interest rate decision later today.

Expectation is for another jumbo 75 bps hike, and anything softer could see a cooling off for the British pound.

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