As widely expected, the Fed doubled the pace of phasing out asset purchases to $30 billion/month. More important, however, was the change in FOMC members' forecasts of rate hikes, from one to three times in 2022. Three more increases are projected in 2023, and two more in 2024. The shift in forecasts once again indicates that the Fed's focus is shifting entirely to inflation: there is no longer a word about its temporary nature. The FOMC, with this trajectory of tightening policy, effectively turns a blind eye to the risks of the new Covid strain. It is hard to expect that with such a monetary setting, the dollar will not be able to strengthen in 2022, especially if the ECB is again cautious today, which will help widen the yield differential between short-term US and EU bonds.

The collapse of the dollar and the positive reaction of risk assets despite the seemingly hawkish outcome of the meeting was probably caused by the peculiarities of positioning in the run-up of the FOMC decision: Nomura wrote that the 10-day average ratio of put options to call options on CBOE reached its maximum level in 13 months, i.e. investors heavily hedged equity markets sell-off in the worst-case scenario of the FOMC meeting (even more aggressive policy tightening), but as it was avoided, massive unwinding of hedging positions followed, allowing risk assets to rebound. The same drivers were at the heart of the dollar's collapse - an increase and then a reduction in positions that hedged unfavorable outcomes of the Fed meeting for the markets.

The Bank of England, in its typical manner, went against market expectations and raised the rate today from 0.1% to 0.25%, which caused the growth of GBPUSD by 0.8% to 1.335. From a technical point of view, the currency pair bounced off the lower parallel of the bearish channel: