Published: 21/04/2022 By ECAPSterling managed a small rally against the Dollar yesterday, albeit only be circa 50 pips. Investors and markets will be paying close attention to Andrew Baileys comments today in regards to the Bank of Englands pathway to interest rate hikes. The recent dovish tone by the MPC members has hung over the pound like a gloomy cloud, however with the recent inflation reading and April's expected to post higher, we should surely see a change of tone from the committee. Any positive comments in the rhetoric from Bailey will give the pound a lift and we may see a test and break back over 1.31.
Markets expect Powell to strike a hawkish tone during his communications today, not only paving the way for another interest rate hike at the Fed’s next meeting in May, but also confirming it will raise rates by an unconventionally large 50 basis points. Yet, with a highly aggressive pace of hikes already priced in, and the dollar trading at very elevated levels, we may see a scenario where investors ‘buy the rumour, sell the fact’. Indeed, the greenback has already started retracing some of its recent gains, selling off against most of its major peers yesterday. EURUSD managed to eke out gains in excess of half a percent, in part due to the retracement in US yields, but also some hawkish comments out of the ECB.