Weekly EURUSD, GBPUSD, USDJPY Forex Analysis July 25 – August 1, 2022
The Fed meets on Wednesday and is widely expected to raise rates again by 75bp. While some even expected a 100bp hike following the upward CPI inflation surprise two weeks ago, it is now clear to everyone that 75bp is more than enough. In addition, the Fed is doing QT (quantitative tightening), which amplifies the effect of the rate hikes on money and credit contraction. Inflation has likely already peaked this summer, and the markets are realizing that. As a result, the focus is shifting to recession fears as the Fed’s and other central banks’ tightening will hurt economic growth and jobs. The general risk-averse mood among investors is likely to persist for the coming months as long as the Fed is on the tightening trajectory. Risk aversion is another bullish factor for the US dollar.