Fed officials expressed disappointment that the energetic increase in interest rates has not yet brought the desired effect. Cleveland Fed President Loretta Mester said the central bank should continue raising rates since the necessary progress in reducing inflation has not yet been made.
Mester's statements are generally riddled with pessimism, including a potential recession, weak economic growth and strong increase in unemployment. But the US government seems to be avoiding admitting that a downturn or recession is already taking place, even though the latest GDP data makes this clearer with its negative readings.
But even if the upcoming inflation data improves a bit in annual terms (from 8.3% to 8.1%), it is unlikely for the Fed to change its hawkish position. Thus, the current scenario in the forex market will continue, while a local rebound may occur in European and US stock indices. Commodity assets will halt ahead of news from the US.
Strong movements will begin shortly before the release of inflationary indicators.
Forecasts for today:
EUR/USD
The pair is consolidating in the range of 0.9670-0.9800 in anticipation of the release of inflation data in the US. If the figure turns out to be in line with forecasts or higher, the pair will resume falling to 0.9550 after it overcomes 0.9670.
XAU/USD
Spot gold is also consolidating in the range of 1660.25-1678.00. If tomorrow's inflation data from the US is in line with forecasts or higher, expect a breakdown of the support level and a drop in price to around 1643.40.
