The Bank of England (BOE) and the European Central Bank (ECB) both hiked 50 basis points.
But there’s a big change in footing between the big three central banks: The BOE, the ECB and the US Federal Reserve.
Everybody’s reading the Fed’s statement as a little more dovish.
The BOE’s statement announced they are backing off. They are conceding either they think recession is a bigger risk or they’re allowing inflation to run a little bit more.
On the other hand, the ECB’s statement was the most hawkish of the three. That’s kind of changed the interest rate risk parity between currencies.
I think that might give the Euro a tailwind over the next couple of months. I don’t think it will last and I think the Federal Reserve will ultimately come out and drop the hammer.
► But right now the bias is towards the Euro.
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