FX.co ★ Hawkish ECB revives risk appetite (expect continued growth in GBP/USD and XAU/USD)

Markets closed higher on Thursday, thanks to the outcome of the ECB meeting and speeches of Christine Lagarde and Jerome Powell. Optimism clearly spilled over, so stocks and commodities rose up, while dollar fell down.

But at first glance, markets semed to have acted illogically as euro and European stock indices declined. That was after the ECB raised the key interest rate by 0.75% to 1.25% and Lagarde said that the central bank gives priority to rate increases to fight inflation. Fortunately, sometime later, markets began to grow, with stocks rising over the closure of short positions.

Regarding how far euro can rise against dollar, much will depend on the plans of the Fed over interest rates. If Powell informs of a slowdown in inflation after the monetary policy in September and hints that the central bank will weaken the pace of rate hikes, dollar will continue to decline, which will lead to the further increase of EUR/USD. This will also cause growth in stock indices, first in the US, then on other global trading floors.

So far, the Fed is still firm in its hawkish position, but the rally in markets that started yesterday is likely to continue today.

Forecasts for today:

GBP/USD

The pair is trading below 1.1600. Overcoming this mark on the wave of a continued market rally will push the quote to 1.1720.

XAU/USD

Spot gold is trading below the strong resistance level of 1722.00. A break of this level amid positive dynamics on markets, accompanied by the weakening of dollar, will lead to a price increase to 1733.00.