Everyone looks up at EUR. Overview for 15.12.2022

The market major reacted to the Fed’s decision quite effectively. The current quote is 1.0650.

The brightest event of December has happened: the US Federal Reserve System carried out the last meeting this year and made some decisions about its credit and monetary policy. The interest rate was lifted by 50 base points to 4.50% y/y, as forecast. This is the fifth instance of the interest rate growth this year. The Fed lifter the rate by 75 base points four times, but this time decided to slow down. Now the interest rate is at its high since 2007.

The Fed commented that it was still up to tightening the monetary policy. Moreover, the regulator will keep on decreasing its balance. Anyway, it is going quite slowly: in March, the Fed used to have 8.9 trillion USD on its balance; in June they started getting rid of some assets, and by December, the balance have reached 8.6 trillion USD. This can hardly be called a tough decrease.

The Fed sees no evidence of a serious recession in the economy, and this is the most important message from the whole speech of the regulator. Now the market is counting on two increases in the rate in winter and spring, so that by May it will have reached 5.00%.

Market attention is now shifting to the ECB meeting scheduled for today. It is a crucial event: from the ECB, the market expects an increase in the interest rate by the same 50 base points. The US will issue November statistics of retail sales and industrial production. Volatility in EURUSD will remain high.