Risk assets generally endured the Fed meeting well despite the abundance of hawkish signals: an indication of almost concrete timing when QE may end (summer 2022) and a shift in dot plot expectations of the first rate hike from 2023 to 2022. An important implication of this is that markets will likely be offered a very short respite between the end of QE and the start of rate hiking cycle, what in theory should fuel more Treasury outflows. Interestingly, the dollar has already erased its post-meeting advantage but this may also be interpreted as resistance plays near the highs of this year (~93.50 level) before a breakout:
The Bank of England today also did not rule out tightening of monetary policy next year, despite conflicting signals from the economy. The fall in retail sales in August and accelerated inflation caused by rising production costs required opposite policy adjustments by the BoE, but it decided not to fend off the flock of other large Central Banks, and stood pat on its early hint to hike rates in the next year. The Cable accelerated rally against USD on unwinding of risks of a "step back" by the BoE in the hawkish path due to the weak recent data and there is an opportunity for GBPUSD to retest the major downtrend line, after which it may target major resistance at 1.39:
Eurozone PMIs missed estimates as activity in both manufacturing and services sectors declined from the previous month. High input prices remain the primary constraint to expansion and it is unlikely to wear off quickly as lowered supply is exacerbated by stubbornly high shipping rates. Input prices rose at the highest rate since September 2000 and this will likely translate into more consumer inflation gains in the coming months. There is a risk that high inflation readings may trigger fears of the ECB hawkish response what is seen as the biggest medium-term upside risk for the Euro.
Regarding the short-term outlook, EURUSD bounced of the support at 1.17, which is the lowest round level in this year. Previous attempt to break lower failed as the pair rebounded to 1.19. Price action in the 1.179-1.181 zone, where the current short-term downtrend line resides, as well as at the 1.19 horizontal level will be the key for determining the prospects of extension of the EURUSD downtrend. If the pair manages to break and hold above the short-term downtrend (blue dotted line) it will most likely target 1.19 again: