30.09.202210:08 Forex Analysis & Reviews: Fed policymakers continue to insist on raising rates by 1.25 by the end of the year

And while the euro is gaining ground against the US dollar, and the British pound is making its way to another weekly highs amid increased optimism, supported by the actions of the Bank of England, the president of the Federal Reserve Bank of Atlanta, Rafael Bostic, said he supports raising rates by another 1.25 percentage points by the end of this year to counter inflation, which turned out to be worse, than he expected.

"The lack of progress so far makes me think much more that we should take a moderately restrictive position," he told reporters during a conference call. "For me, acceptable rates are in the range from 4.25% to 4.5%. I prefer that we get to this level by the end of the year."

Such aggressive statements by representatives of the Fed are not news this week. Fed officials raised interest rates by 75 basis points at the September 21 meeting, bringing the federal funds rate target from 3% to 3.25%. Immediately after that, policymakers continued to prepare the markets for further changes in the cost of borrowing, and median forecasts already show that Fed officials are laying on a rate of 4.5% by the end of this year.

"Inflation is still high and too high and not moving fast enough back towards our 2% target," Bostic said, adding that he expected to see an improvement in supply chain imbalances in early summer that would help ease price pressures. "The forecasts did not come true, and the situation on the energy market has not changed, which forced me to adjust my political thinking," he said.

The head of the Federal Reserve Bank of Atlanta still hopes that the US economy will be able to avoid a recession or a much higher unemployment rate. According to his forecasts, unemployment will rise to about 4.1% from 3.7% — a small increase that will continue to keep the labor market at a fairly strong level. "I still don't think the recession is a settled issue. Yes, we may have some weakening in the economy, but I don't think that at this stage it will lead us to a historical crisis."

Despite such hawkish statements by other American politicians, the euro and the British pound continue to strengthen their positions against the US dollar, taking advantage of sufficient optimism after the recent intervention of the BoE in the situation on the currency and bond market.

As for the technical picture of EURUSD, the bulls have regained their advantage and the market under their control, which they lost at the beginning of the week, and are now aiming to break through the nearest resistance of 0.9840. It is necessary to do this if they expect the upward correction to continue at the end of this month. A breakdown of 0.9840 will take the trading instrument even higher to the area of 0.9890 and 0.9950. But despite the good upward prospects, protecting the nearest support of 0.9780 is still an important task for the bulls. Its breakthrough will push the euro to a low of 0.9730, but there will be nothing critical in this situation either, since there is the lower boundary of the new ascending channel. Only after missing 0.9730 will it be possible to start getting nervous, as the pair will easily fall into the area of 0.9680 and 0.9640.

The pound continues to win back positions one by one thanks to the BoE's support. Now bulls are focused on the 1.1200 resistance, the breakthrough of which will open up prospects for further recovery in the area of 1.1260 and 1.1320. It will be possible to talk about the return of pressure on the trading instrument only after the bears take control of 1.1070, but this will not cause serious damage to the bull market observed since the middle of the week. Only a breakthrough of 1.1070 will push GBPUSD back to 1.1010 and 1.0950.