Fed, BoE Signals Challenge Market Optimism as Reflation Trade Loses Momentum

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Market Overview Analysis by Ipek Ozkardeskaya covering: EUR/USD, USD/JPY, AUD/USD, Nasdaq 100. Read Ipek Ozkardeskaya's latest article on Investing.com

The week hasn’t been pleasant for the market bulls. On Wednesday, the FOMC minutes showed the disturbing truth that ‘many’ Fed members wondered whether keeping the rates ‘high for longer’ was sufficiently restrictive to tame inflation, and if hiking the rates wouldn’t be a better idea.

Across the Channel, the data released this week showed that wage growth in the euro area increased 4.7% in Q1 – a red flag for officials who have been banking on a slowdown to keep inflation in check. And finally, a set of too-strong-to-be-pleasant data from the US gave a final punch to the bulls. Inflation data out this morning showed a slowdown in core CPI to 2.2%, ruling out any sense of emergency for the BoJ to continue hiking the rates. And thetipped a toe below the 66 cents mark this morning and could lose the latest positive momentum if the pair slips below 0.6580, the major 38.2% Fibonacci retracement on the latest rebound.) remains a well-sheltered harbor from the rising hawkish winds.

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