Buck down, Fed jitters hit markets

Surprisingly, there is a lack of consensus, as three officials voted in favor of hiking interest rates. More importantly, there is confusion about what the Fed will do next, with this meeting marking the fifth straight gathering in which it chose to keep borrowing costs unchanged. A growing number of investors and traders are starting to believe that Warsh’s reign may not manage to rein in inflation while also voicing concern about the lack of forward guidance.

FX markets seem to be taking the whole event as a rather “dovish” show, without any promises to communicate a change of heart. There is a contingent of economists that worries the era of “telegraphed” Fed moves is indeed over. G-10 currencies all rose by over half a percent on average, while emerging-market tender reached multi-month highs, with the MSCI Emerging Markets Currency Index climbing to its highest point since the first week of May. Stock exchanges were not pleased with the disappointing revenue outlook after Meta revealed its earnings report, while Microsoft defended its high spending on artificial intelligence.

A plethora of numbers will be out at 8:30 AM, with June Personal Consumption Expenditures and a reading of Q2 Gross Domestic Product being the main features. If expectations for a 2.0% pace of growth are not met, the Buck could face a tumultuously tumbling end to the month.

What to Watch This Week…

• Euro-zone CPI, Friday
• BOJ Meeting Friday
• Monex USA Online is always open

The complete Economic Calendar can be found here.

EUR

The Euro climbed to its highest level since June 19th after the Buck’s downfall, based on a lack of faith in the Fed’s ability to keep inflation steady. Additionally, data points helped, with Euro-zone confidence surveys all better than forecasts for industrial growth, the economic outlook, services, and consumer sentiment. A reading of Q2 GDP also showed double the growth expected at 0.4% vs. 0.2%. The Euro could be on the rise if there is relief on some of the war-front headlines.

GBP

Pound Sterling rose following the Bank of England’s meeting, at which members also decided to keep interest rates unchanged. Much like the Fed, the vote included three officials calling for a 25-basis-point increase. Per BOE Governor Andrew Bailey, the committee is ready to act as “necessary” and believes U.K. inflation will peak at 3.2% for the year. Next week, we will get a chance to look at the housing market as well as activity via the Purchasing Managers’ Index.