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Federal Reserve to Deliver First Interest Rate Decision for 2022


Boris Johnson will this week find out his fate regarding the definition of a party as the pressure is mounting following interviews with Metropolitan Police on duty at Downing Street with investigation leader Sue Gray expected to meet with Dominic Cummings today. There are rumours going round that it will be impressive for PM Johnson to survive the scandal with some suggesting a resignation could come this week.

There is however still quite a few things which have to fall into place and it will be significant as to what the wording is from Sue Gray. Supposedly at the peak of doubt last week the 1922 Committee received 12 letters of no confidence from MP’s which is considerably below the required 54. Johnson had suggested that everyone should wait for the report this week so by the end of this week if we do have the findings of the report things could change.

Another key focus for Sterling this week is the situation between the Ukraine and Russia as the Foreign Office over the weekend suggested Russia has a plan to plant Russian political ally in Ukraine politics. Russia has accused the Foreign Office of meddling and making accusations up. Whilst back and forth between the UK and Russia is not unheard of, the fact that Russia has had 100,000 soldiers on the border with the Ukraine does raise some questions with regards to their intent.


Covid demonstrations continue across Europe with Brussels being the main protest this Sunday. Around 50,000 protesters were thought to have attended and was dispersed in the end by riot police and water cannons. There were demonstrations across the weekend with Athens, Helsinki, Paris and Stockholm also seeing mass gatherings. The protests are regarding many EU countries revealing plans for vaccine passports for travel whilst in Sweden you will need to show a vaccine certificate to enter an indoor venue with over 50 people.

Across Europe there are still high numbers of infections and hospital cases continue to rise. The lockdowns that were introduced in December across Europe were one of the factors that has helped the GBP/EUR interbank rate climb up to the 1.20 level. Over the course of the next few months the impact that coronavirus may have on the Euro will be interesting. If there are still restrictions in place as we start to move through February it could have a damming effect on growth on the continent.

Many countries like the UK and the US are planning to start raising interest rates over the next few weeks, with the UK already having raised at the end of 2021 and the European Central Bank are unlikely to be able to follow suit. Should 2022 bring several hikes in the UK and US then there could certainly be further downside for the Euro against major currencies.     


This week is very significant for the US Dollar as the Federal Reserve will deliver their first interest rate decision for the year. Inflation in the US climbed to 7% at the end of last year which has put markets on high alert for several rate hikes in 2022. Like most of the Western world interest rates took a nosedive through the pandemic and with inflation climbing fast the Fed once again may see this the time to act. Chairman of the Federal Reserve Jerome Powell has suggested that this year we will see more than one hike, he will also deliver a statement on Wednesday following the decision.

The US Dollar this year has moved off the lows of 1.33 in 2021 against Sterling, climbing up to 1.36 at the highs so far for 2022. The last time US Interest rates were raised multiple times in a year was 2017, this saw the GBP/USD fall down to the low 1.20’s. Markets and investors flood into the US Dollar when there are better levels of interest on offer. If Jerome Powell, in his statement this week, alludes to further interest rate hikes this year then there is every possibility of US Dollar strength. Alternatively, if there isn’t an interest rate hike this week then that may cause the US Dollar to weaken as it would go against market expectations. If you’re looking to complete a US Dollar transfer, then it may well be worth getting in touch with your account manager in advance of Wednesdays decision.

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