Dollar firmer post Fed

The dollar has jumped post yesterday’s Fed meeting, gaining more than a cent against both the euro and sterling to trade at around $1.1950 and $1.3975 respectively this morning, which in turn leaves the single currency-pound exchange rate at around 85.5p

US bond yields also rose post Fed with 10-year yields closing yesterday’s session almost 10bps higher at 1.58%, while equivalent German yields are following suit this morning and are around 8bps higher at -0.17%. Meanwhile, European equity markets have opened in the red this morning after US stocks ended lower yesterday

The Fed left both interest rates and the pace of its monthly purchases unchanged following yesterday’s meeting. It revised up its near-term forecasts for growth and inflation and reiterated that it expected the recent spike in the latter to be transitory, though it also indicated an earlier start to hiking interest rates – in 2023 – than had been the case prior to yesterday

The Fed raised the “possibility that inflation could turn out to be higher and more persistent” than it expects. If so, it would be “prepared to adjust the stance of monetary policy” as needed, which would include bringing forward an increase in interest rates

ECB member Lane says the “challenge” for the ECB is to maintain favourable financing conditions through the summer and beyond in order to support economic recovery in the Euro area

Data due today include the final reading for Euro area inflation in May – the initial reading showed the annual rate at 2.0%, up from 1.6% in April –   and jobless claims in the US