Global stock markets inched higher over the weekend as the Fed kept the interest rate unchanged at 5.25% and then hinted at potential rate hikes by the end of the year. The dual stance seems to be a verbal intervention, indicating the possibility of more drastic measures to prevent a market collapse or unjustified growth.
Although Fed Chairman Jerome Powell already spoke extensively at the press conference following the bank's meeting last week, investors remain eager to catch new details and insights about the monetary policy, anticipating upcoming speeches of other Fed members.
In the UK, among important economic data, the publication of consumer inflation figures stands out ahead of the Bank of England's monetary policy meeting. Forecasts say CPI will decrease from 8.7% to 8.5% y/y and adjust from 1.2% to 0.4% m/m. This could force the Bank of England to raise the key interest rate by 0.25% to 4.75%.
Previously, the central bank hinted at further rate hikes due to high inflation. However, if inflation decreases to the expected levels or even slightly lower, the Bank of England will take a similar hike to that of the European Central Bank. This will increase risk appetite, resuming the upward trend of pound.
Trading activity in Europe will be low as local financial markets will be closed today due to the holiday in the US.
Forecasts for today:
XAU/USD
Gold continues to trade within a very narrow range of 1931.40-1969.85. This will persist until the end of this week.
AUD/USD
The pair rose above 0.6825. There may be a rebound, but the quotes will climb towards 0.7000 after a short while.