The Fed’s hawkish determination to combat inflation | 25 August 2022

25 August 2022, GBP/USD

The Fed’s hawkish determination to combat inflation

GBPUSD trading plan:

Yields and yield curves indicate flow-driven demand for the dollar and USD assets, while the level of the dollar has implications for the stock of these assets. A higher dollar makes it more expensive for foreign borrowers of dollars to service their debt, generating deleveraging pressure. It also makes the cost of buying new dollar assets more expensive in foreign-currency terms. But the big driver of global capital flows is trade. Capital flows are the flip side of trade flows, and trade imbalances create capital imbalances which drive capital flows. Expectations are that Powell uses the symposium to re-state the Fed’s hawkish determination to combat inflation.

Investment idea: sell 1.1865 and take profit 1.1785.

David Johnson
Analyst of «FreshForex» company
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