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The probability of the Federal Reserve increasing interest rates during the July 26 meeting is expected to be around 76%, similar to the estimate prior to Powell’s speech. The market pricing was acknowledged by Powell, who stated that decisions will be made on a meeting-by-meeting basis. However, he also brought attention to the fact that almost all members of the Federal Open Market Committee (FOMC) have intentions to raise interest rates at least somewhat by the end of the year.

During his testimony, the value of dollar decreased and is now close to the lowest point of the session. As a result, the euro has increased by 55 pips to reach 1.0970 today.

It is significant to emphasize that Powell’s actions are not the only event occurring today. According to Goolsbee from the Fed, the recent decision on interest rates was nearly evenly divided for him, which implies that he will oppose any additional increases.

The inflation report for the UK was surprising, as the core Consumer Price Index (CPI) was 7.1%, which was higher than the expected 6.8%. This suggests that the likelihood of the Bank of England’s terminal rate surpassing that of the Federal Reserve is increasing.

It is possible that we are witnessing the impact of end-of-quarter transactions. The decrease in Treasury yields and the decline in tech stocks indicate some level of realignment following the strong movements in Q2.

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