HONG KONG : The dollar held near its overnight 20-year peak on Wednesday ahead of the outcome of the Federal Reserve policy meeting at which markets are pricing in an outsized 75 basis point interest rate hike as policymakers try to rein in rampant inflation.
Sterling was at $1.20135 after slumping to a 15-month low versus the dollar at $1.1934 the previous day, not helped by the possibility of a new referendum on Scottish independence, while the euro was at $1.0428 just above its overnight one-month low. [GBP/] The sharp pick up in expectations followed media reports, first by the Wall Street Journal that a bigger rate increase was on the cards after data released last week showed the U.S. consumer price index surged 8.6 per cent in the 12 months to May, the largest year-on-year increase in four decades.
"In our view, it will take more than a 75bp hike tomorrow, or a nod to a 100bp hike for the FOMC’s July meeting, to push the USD up significantly after the FOMC meeting."
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