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EUR/USD Up After Fed Hike but Skating on Thin Ice

The U.S. dollar took a turn to the downside on Wednesday following the July FOMC announcement. Although the Fed raised interest rates by 25 basis points to 5.25%-5.50%, it did not adopt an aggressive outlook, with Chairman Powell refraining from definitively signaling further policy firming. The overall tone drove Treasury yields lower, pushing EUR/USD towards the 1.1100 handle.

The euro’s gains, however, could be short-lived if the European Central Bank embraces a conciliatory stance at the end of its next meeting. For context, the institution led by Christine Lagarde is seen lifting borrowing costs by a quarter point on Thursday, but forward-guidance could shift in a dovish direction in the face of the deteriorating health of the economy in the region.

If ECB fails to commit to another rate rise and takes up a data-dependent approach, traders may begin to increase wagers that the hiking cycle is over, pricing out the probability of more tightening in September. This could trigger a sharp downward correction in the euro, causing the common currency to erase part of its 2023 rally.

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Important Notice Regarding Regulatory Requirements Imposed on MCI Global Investment Advisors Limited

The Financial Conduct Authority (FCA) has granted MCI Global Investment Advisors Limited’s (FRN 948996 (MCI) application to place requirements on it, which will impact the management of Novus Black Fund Ltd (NBF). These regulatory actions are intended to protect the interests of investors.

Key Details of the Requirements:

Novus Black Fund UK Ltd:

  • No new activity will be conducted on any broker accounts held for NBF.
  • All open positions at brokers will be closed, including the netting off of any fully hedged positions.
  • Daily reporting of the broker account balances will be provided to the FCA until further instructions are received.
  • Broker balances will be transferred in accordance with FCA written instructions.

More details of these requirements are available on MCI’s Financial Services Register entry
at:  https://register.fca.org.uk/s/firm?id=0014G00002fd8htQAA

A further update will follow in due course.

MCI Global Investment Advisors Limited