Full Week Ahead: BoE and Fed Set to Hike Rates, With Non-farm Payrolls to Top It Off

Dollar on Fire as the Fed Is Getting Ready to Add 50 Bps to the Interest Rate.

The US Dollar is on the offensive once again, although last week’s U.S. GDP numbers disappointed and triggered a stall in the greenback’s advances. However, analysts still expect the FOMC to raise the interest rate by 50 basis points at this week’s meeting, and some even see a possibility for a 75 bps hike in June.

The European Central Bank is still reluctant to tinker with the interest rate although most of its major counterparts have already hiked it several times. This is part of why the Euro is being battered by the US Dollar but then again, most of the “big” currencies are losing ground against the greenback.

Key Events for the Week Ahead

Later today, at 2:00 pm GMT we will take a look at the U.S. Manufacturing PMI, which is considered a high-impact indicator of economic health. However, the expected number is 57.5, very close to the previous reading of 57.1 and usually the impact is muted if the actual number matches expectations.

Acton heats up Wednesday at 6:00 pm GMT when the FOMC is set to announce the rate. A 50-bps hike is already priced in but any clues about future plans will surely add volatility to the market. Half an hour later, at 6:30 pm GMT, the usual press conference takes place. Fed Chair Powell will discuss monetary policy and will answer journalists’ questions, which will have a strong impact on the USD.

Thursday at 11:00 am GMT it’s the Bank of England’s turn to announce the rate, which is expected to change from 0.75% to 1.0%. A Monetary Policy Summary will be released but no press conference is scheduled.

The final major event of the week is scheduled for Friday at 12:30 pm GMT: the U.S. Non-Farm Payrolls (NFP). This is the most important jobs data for the United States economy and has a strong impact on the greenback as well as on the Fed’s decision regarding the interest rate. The expected number is 390K, while last month’s reading was 431K.

Technical Outlook – GBP/USD

The Pound’s weakness against the greenback is evident as the pair is sliding through support barriers and currently trading at levels last seen in mid-2020. Last week’s disappointing U.S. GDP numbers triggered a pullback but this was also due to the oversold condition of the pair, as shown by the RSI position.

The balance is clearly tilted towards the USD, thus bearish movement should resume as soon as the current retracement is over. Potential resistance is located at 1.2690, while the first support is the low created last week: 1.2410. Longer-term resistance is located at 1.2250.