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Market Comment - 27th July 2022

Posted by Stuart PritchardJuly 27, 2022

Good morning,

Today is all about the US interest rate decision. The FED is expected to raise it's base rate 0.75%. This would be a big hike and would take the rate to 2.5%. Historically speaking 2.5% is still a low rate so it's not as extreme as it sounds. In the early 80's the interest rate was 22%! However a more typical rate would be between 2% and 6%. It's only the last decade that has seen such a sustained period of low global rates. Anything outside of a 0.75% hike could cause volatility.

Interest rates are the main way a central bank controls inflation. Calls of super high inflation have been in place since the credit crisis. It would seem the pandemic and the Ukraine situation have finally made the predictions come true....albeit slightly later than expected.

A return to "normal" interest rates was inevitable. The worlds banks had few levers left to pull or push to control global economies.

Before the interest rate decision in the US there is also durable goods order information out that could also move GBP/USD rates.

Other than that the markets seem to be pricing in a potential win for Rishi Sunak as Pound rates have generally picked up in the last 24 hours.

Business news is dominated by the latest round of strikes at train stations although this has had little bearing on the markets.

Today’s Economic Calendar

US: 13:30 Durable Goods Orders

US: 19:00 FED's Interest Rate Decision

US: 19:30 FOMC Press Conference

As ever we look forward to keeping you in the loop and look out for our next update.

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