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The Week Ahead – Cracked walls



USDCHF consolidates ahead Fed response

Chart of USDCHF

As traders price rate increases amid financial instability, the US dollar is on the verge of a whipsaw. Policy guidance has so far been data-dependent, not so much with banking headlines lately, which would make the outcome of the Fed meeting anyone’s guess. As the drama unfolds during the central bank’s blackout period, suspense is building up along with volatility as nobody wants to come out on the wrong side on Wednesday. Will Powell & Co back down? While a dovish pivot might soothe the market, a stubbornly hawkish position would fuel the flight for quality and push the greenback higher. 0.9430. 0.9050 The recent bottom.

GBPUSD remains steady as the BoE may offer a modest increase

Chart of GBPUSD

As the Bank of England evaluates its rate-hike options, the pound strengthens. In the three months prior to January, wage growth in the UK has slowed. The BoE is expected increase its interest rates by 25 basis point to 4.25% next Tuesday. While worries about the banking sector raise bets of a pause in monetary normalisation, the market hopes that the government’s fiscal policy would ease the inflationary pressure, lessening the burden on the central bank. Finance minister Jeremy Hunt’s policies to address the tightness in the labour market may…

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