Both euro and pound continue to see gains as expectations of a pause in interest rate hikes by the Fed grows stronger.

Late last week, many economists expressed belief that the Fed will raise rates by a quarter of a percentage point in an attempt to reinforce its campaign to curb high inflation. Such a move will push rates to a range of 4.75% to 5%. However, after the Fed and five other central banks announced a joint action on Sunday afternoon to increase liquidity, most are now unsure whether the committee will take a pause as early as the March meeting or not.

The Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve and Swiss National Bank announced coordinated action to increase liquidity provision via US dollar liquidity lines. In order to increase the efficiency of swap lines when providing funding in USD, the central banks agreed to increase the frequency of 7-day operations from weekly to daily.

The fact that the Fed has gone the extra mile with other central banks to rescue the banking sector and keep liquidity flowing suggests that pausing the rate hikes now is the best solution. Powell also said that focusing on stabilizing liquidity in the banking system is needed right now even though it would certainly weaken the USD position.

At the time of writing, EUR/USD has a very good chance of getting back to the March highs, but for this to happen, buyers need to keep the quote above 1.0690. That will allow the pair to go beyond 1.0760, heading towards 1.0800 and 1.0835. In the event that sellers manage to take control of 1.0690, the pair will fall to 1.0650 and 1.0615.

In GBP/USD, buyers are ready to keep storming the monthly highs, but the quote has to stay above 1.2220 and breakthrough 1.2300 in order to maintain the momentum. Only a breakdown will push the pair to 1.2340 and 1.2390. Should sellers take control of 1.2220, a decline will occur, which will bring the pair to 1.2170 and 1.2115.