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17.08.2022: How Fed’s actions may affect interest rates and national currency?

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Traders have already prepared for the key interest rate hike by the Bank of England. At the recent meeting, the UK monetary authorities expressed concerns that the country’s economy might tip into a long-lasting recession. Today’s inflation report proved an acceleration in the consumer price growth. Today, the UK Office for National Statistics unveiled that inflation jumped to 10.1% from 9.4%, whereas economists had expected a smaller rise to 9.8%. Thus, there is no doubt that the BoE will take a more aggressive approach to the key interest rate hike. However, the news has not affected the pound sterling, which is inching down at the moment. It seems that after yesterday’s correction, the pound sterling lost its upward potential at least for now. The euro has faced almost the same problem. The fact is that the second GDP estimate for the second quarter failed to affect the market situation. It just met the preliminary data, which was priced in long ago. Nevertheless, there is a possibility of a rise in the European currencies. Yesterday, the currencies rebounded amid the US statistical data. Today, the situation may repeat. In addition, today, the US is going to disclose a more significant report than the industrial production figures. Thus, traders are waiting for data on retail sales that may show a smaller rise compared to the previous period. In other words, it may point to a decline in consumer activity, which is the main driver of the US economy. In the light of mounting concerns about the US economic recession, such reports will only fuel fears. This, in turn, may lead to the greenback’s depreciation. What is more, today, the US is going to publish the recent FOMC meeting minutes. Traders hope to find out some hints about future actions of the Federal Reserve. On the trading chart, we see that the euro/dollar pair broke the support level of 1.0150 due to a rapid decline. However, the price failed to settle below the control level of 1.0100. As a result, it rebounded above the support level. It is quite possible that 1.0150 is still exerting pressure on sellers. That is why one of the possible scenarios presupposes a rebound towards 1.0240. The alternative scenario will become possible if the price settles below 1.0100 at least on the four-hour chart. In this case, the quote will start falling to the parity level. Meanwhile, the pound/dollar pair rebounded from the psychological level of 1.2000. This action boosted the volume of long positions, thus causing a rise of approximately 100 pips in the pound sterling. However, the rebound may slacken near 1.2120/1.2150. In this case, the volume of short positions will gradually increase, thus returning the pair to the psychological level of 1.2000. The pair will continue gaining in value if it consolidates above 1.2160 on the four-hour chart.

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00:00 INTRO
00:24 UK ANNUAL INFLATION GROWTH RATE
00:46 QUOTES
01:04 EUROZONE ANNUAL GDP GROWTH RATE
01:22 USA
02:20 EUR | USD
03:09 GBP | USD
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