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Dollar collapsed despite the Federal Reserve's decision to keep interest rates unchanged amid a recent inflationary surge in the region. Fed Chairman Jerome Powell noted the acceleration in the pace of consumer price growth but advised against dramatizing it, classifying it as just seasonal. He said inflation fluctuates from year to year in February, and there exists no rule that it must increase. These words could be interpreted as a statement of readiness to cut interest rates, even with the current level of inflation. The market reacted accordingly, pricing in the expectation of a rate cut as soon as June.
Dollar may continue to fall today, partly due to preliminary assessments of business activity indices in Europe and the US. But the main event will undoubtedly be the Bank of England's meeting. Although the refinancing rate will almost certainly remain unchanged, the distribution of votes on the issue of interest rates will be crucial. If it turns out roughly the same as a month and a half ago. the level of interest rates in the UK and the US will at least equalize. It may even be higher in the UK for a while, which will boost pound's growth, followed by euro.
EUR/USD rose by nearly 100 pips during speculative growth, leading to an almost complete recovery in price from the recent decline. Considering the scale of price changes in the market, signs of overbought conditions could be seen, which could provoke a technical pullback. However, speculators may overlook this situation, allowing euro to rise towards the local high.
Similarly, GBP/USD rose in price, reaching the level of 1.2800. Lower timeframes show the pair's overbought condition, which could lead to a rebound. Speculators will overlook this situation if the price stays above 1.2800 on the daily timeframe.
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