The Fed will kick off a busy week of central bank action on Wednesday. Signs of peak inflation has seen investors lower their expectations about the pace of tightening and the terminal interest rate. Risk assets have rallied as a result. But will the Fed throw a spanner in the works? The FOMC is expected to hike rates by a more standard 25 basis points following a 50-bps hike in December.
What to watch: USD, Gold
Bank of England Policy Decision
Thursday, February 2
12:00 GMT
An already-split Monetary Policy Committee is unlikely to be unanimous as they consider whether to opt for 50 or 25 basis point hike. The markets are about 65% confident of a 50-bps hike owing to high underlying inflation, strong wage growth and unexpected resilience in the economy. Will the GBP/USD rise to 1.25?
What to watch: GBP, UK 100
European Central Bank Policy Decision
Thursday, February 2
13:15 GMT
Several ECB officials have all but committed to raising the key rate by 0.5% to 2.5%, although policymakers have expressed different preferences for March. Thus, the market reaction on Thursday is likely to be about the future policy decision, especially after ECB President indicated there will be significant policy tightening at a "steady pace". Will Christine Lagarde provide more clarity on this?
What to watch: EUR, Germany 40
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