FX.co ★ Federal Reserve Chairman Jerome Powell is not going to stop

Buyers of risky assets ignored yesterday's Federal Reserve Chairman Jerome Powell's speech. He said officials would not flinch in the battle to contain inflation, strengthening market expectations that they will hold a third large-scale rate hike at the end of this month. "We need to act directly and decisively, as we have done before," Powell said during his speech at the Cato Institute Monetary Policy conference in Washington. "My colleagues and I are firmly committed to a common goal and will continue to achieve it."

Starting in the spring of this year, the Federal Reserve has been raising interest rates to curb the highest inflation in four decades. The next open market operations committee meeting will be held on September 20–21. Powell left the possibility for another move by 75 basis points — after a similar increase in June and July. He said the decision depends on the "totality" of incoming data.

Next week, on Tuesday, we will receive important information about consumer prices for August. Economists forecast growth of 8.1% in August, down from 8.5% in July. "The Fed bears full responsibility for the decisions made and price stability," Powell said, noting that history warns against premature policy easing. He made the same statement on August 26 at the Fed's annual meeting in Jackson Hole, Wyoming.

Investors have long bet that the Fed will play "big" again after hawkish comments from other Fed representatives. Interest rate futures show that the Fed's rate hike by another 0.75% has already been almost fully considered in the price. In addition, after the statements made yesterday, analysts at Bank of America Corp., Barclays Plc, and Jefferies LLC also changed their forecast for gigantic growth. Economists at Goldman Sachs Group Inc. did the same on Wednesday evening.

It is obvious that despite the increase in rates, the economy continues to show good results due to stable consumer spending. The labor market remains strong, with unemployment at 3.7%. This allows officials to hope for a softer landing when the growth of inflation slows down. However, expectations for future prices among the population continue to rise, as inflation has exceeded the Fed's 2.0% target for more than a year, creating an additional headache for officials.

Yesterday, the baton was intercepted by the European Central Bank, which raised rates by 75 basis points. But this was not the main reason for the increased demand for risky assets. According to rumors, representatives of the European Central Bank are ready to announce another large-scale interest rate increase at their October meeting, but on the condition that the inflation data will require such changes.

As for the technical picture of EURUSD, yesterday's decisions changed it. Trading is already above parity, which creates some prerequisites for further recovery of the trading instrument. In the event of a decline in the pair, the bulls need to cling to 1.0000 with all their might, since by missing this level back, they can say goodbye to hopes for a larger recovery of the pair. Currently, the nearest target of buyers is the resistance of 1.0110. Its breakthrough will give buyers of risky assets confidence, opening a direct road to 1.0190 and 1.0240. The farthest target will be the 1.0270 level. In the event of a decline in the euro and a breakout of the euro's parity against the dollar, buyers will certainly show something around 0.9940. But, having missed this level, the pressure on the pair will only increase, strengthening the bear market, which can push the trading instrument to the lows of 0.9880 and 0.9810.

Meanwhile, the pound continues to fight for the 16th figure, and today we may see a breakdown of this range. This will create a chance for a larger upward correction, allowing a direct road to the highs of 1.1650 and 1.1690. The farthest target in the current bullish movement will be the 1.1755 area. If the pressure on the pair returns, buyers now need to do everything to stay above 1.1560. Without doing this, you can see another large sale to the level of 1.1510. Its breakdown will provide a direct road to 1.1460 and 1.1406.