EUR: what did Powell say? Overview for 01.12.2022

The market major on Thursday is growing. The current quote is 1.0450.

Yesterday was full of statistics, but the key catalyst was different. Activity of investors heated up after the speech of the head of the US Fed Jerome Powell. He confirmed that the next increase in the interest rate might be more modest that the previous ones.

The idea is to raise the interest rate by 50 base points instead of 75 points, like it used to be raised for several meetings in a row. Simultaneously, Powell mentioned that the monetary policy on the whole would remain limiting at least for some time in the future – until there appear some confirmations that the inflation has subsided.

So, according to the CME observations, the market now considers a 50 base point increase of the rate to be 75% possible, so that at the meeting on 14 December the interest rate will reach 4.50% y/y. As for inflation, Powell acknowledged that it was too early to celebrate victory.

It seems that all that Powell has said lately are the main highlights for understanding the future steps of the regulator. Let us just stick to them.

For the USD, the slow-down in the growth of the interest rate became a negative signal.