After the US Fed announced an interest rate hike, the markets remained calm as experts anticipated the 75 bps increase; however, volatility spiked during the FOMC Press Conference, where chairman Powell reiterated the commitment to bring inflation back down to 2% and restore price stability. Powell said that a growth slowdown is necessary to bring inflation down.
When asked about a potential recession, Powell said;
'It doesn't seem like the US economy is close to a recession; we do see some slow down in growth but also strong market labor data, overall demand is strong, and the economy is on track to continue to grow this year, but the slowdown in the second quarter is notable.' which left a pessimistic impression on the US markets.
The US will announce the GDP growth rate tomorrow; expert consensus is at 0.5%. Some Financial firms anticipate a contraction; if the reading is negative, the US will be in a technical recession by definition, although the labor market is still strong, sending a signal of economic strength.
The US dollar got significantly weaker across all the major currency pairs towards the end of the trading session.
The Cable broke the resistance level from our falling wedge, suggesting that the price will continue moving upwards in the short term. The pair might find a new resistance close to the upper Bollinger band; if the breakout is completed at $1.22, the price could reach the $1.25 level soon.
The relative strength index is at 56%, allowing GBP to continue rallying before entering an overbought status. Our parabolic SAR indicator suggests that the price will likely continue climbing in the upcoming trading sessions.
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