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Everyone seems to be convinced that the recent slowdown in US inflation will make the Fed stop raising rates and consider the gradual easing of monetary policy. However, Fed Chairman Jerome Powell hinted during the press conference that rate hikes may resume in the succeeding months, all in accordance with the central bank's initial plan. This may be due to the overheated labor market, as employment in the US nears historical highs. This situation poses serious consequences for the entire economy, and could be addressed only through higher interest rates.
The Fed's decision to keep interest rates unchanged may also be in order to assess its impact on the economy and markets. However, the effect could not be seen as early as this time, so Powell's statement could be perceived as an indication that no rate cuts should be expected until next year.
On another note, the ECB could raise its rate from 3.75% to 4.00% today, followed by a speech from Christine Lagarde. Although inflation in Europe and the US continues to slow down, the labor market situation in the two regions differs significantly, as unemployment in the former remains relatively high and could only be addressed through a relatively accommodative monetary policy. However, the rate hike could be the last, and the ECB may also be the first to start lowering interest rates. If this happens, the interest rate disparity will grow in favor of dollar.
The imbalance could have serious consequences, primarily for the US economy, but this will only become evident over time.
EUR/USD traded above 1.0850, but then bounced back after a short while. Nevertheless, the trend remains bullish, especially if the pair stably holds above 1.0800. Everything may change if the quote drops below 1.0750.
GBP/USD hit a new high in the medium term, indicating a prevailing bullish sentiment among market players. Staying above the level of 1.2700 could trigger further growth, but it will also signal overbought conditions in the short-term time frames.