USD

The dollar fell on Wednesday evening following the Federal Reserve interest rate decision. Dollar bulls were disappointed as the Fed seemingly ruled out the imminent prospect of hiking interest rates in increments of more than 50 basis points. Instead the Fed unanimously opted to hike interest rates by 50 basis points to a range of 0.75%-1%, its biggest rate increase for two decades.

The Fed also announced that they would begin shrinking their balance sheet in June by $47.5billion per month for the first three months rising to $95bn per month thereafter. The initial announcement was widely in line with market expectations hence the initial muted market reaction. However, comments from Fed Chair Jerome Powell that “a 75 basis points hike wasn’t something the committee were actively considering” sent the dollar tumbling by close to 1% against Sterling. Some investors had also positioned themselves for a hawkish tilt from the Fed.

Key announcements

12:00 – GBP – Bank of England Minutes
12:00 – GBP – Bank of England interest rate decision – Rates expected to increase from 0.75% to 1%