Welcome to a new trading and central bank rate-hike week.
After an unexpectedly higher U.S. inflation reading last Friday, chances for a 75bp Federal Reserve rate hike at the upcoming FOMC meetings are rising.
The Fed is expected to raise rates by 50bp on Wednesday but the main focus will be on the quarterly summary of economic projection which includes the dot-plot rate projections. Fed policy makers may pencil in a steeper path of interest rate hikes this year in the light of recent inflation developments. While a 50bp rate hike this month is all but certain, traders speculate on an even bigger rate hike of 75bp, and if not in June, then maybe in July. Apart from the hawkish guidance, the focus is shifting to the broader impact of the central bank’s policies on the economy. Aggressive rate hikes are having little effect on rising price pressures while the economy is cooling. Economists at Bloomberg put the chances of a recession at three in four next year saying “a downturn in 2022 is unlikely, but recession in 2023 will be tough to avoid”.
Last but not least, the Bank of England is widely expected to raise its interest rate on Thursday from 1 percent to 1.25 percent. Some market participants even price in some probability of a 50bp hike but this seems to be the much more unlikely scenario. Overall, the pound is anticipated to fall even further since the U.K. economy looks set to struggle.
GBP/USD – Bearish breakout Sterling broke below 1.24 and the yearly low at 1.2155 isn’t all that far away now. Bears will now focus on price breaks below 1.2240 and 1.22. If the yearly low is cleared, there might be nothing in the way of a fall towards 1.20. The former support at 1.24 could now serve as a resistance. 
Our trading ideas for today 13/6/22:
EUR/USD Long @ 1.0510
Short @ 1.0475
GBP/USD
Long @ 1.2290
Short @ 1.2240
DAX® (GER30)
Long @ 13580 Position has hit profit target at 13620
Short @ 13480
Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.