British Pound, GBP/USD, US Dollar, Fed, BoE, Hang Seng (HSI) – Talking Points
- The British Pound is struggling to bounce despite imminent BoE hikes
- Bonds markets continue to digest higher rates and their implications
- All eyes are on the Fed today, will USD strength overwhelm Sterling?
The British Pound remains vulnerable against the US Dollar despite the Bank of England being expected to raise interest rates by 25 basis-points (bp) tomorrow. This is largely due to a Federal Reserve that has turned uber hawkish over the last month ahead of their meeting today.
As a result, the US Dollar is like a bull at the gate, with only small gyrations over the last few sessions. There is a sense of pent-up energy for the ‘big dollar’ as traders position themselves ahead of todays all important Federal Open Market Committee (FOMC) meeting.
The market has priced in a 50 bp hike for later today and 2 more bumps of 50 bp at their subsequent meetings in June and July. The focus will be on the language in the post announcement press conference.
While currency markets kept their powder dry in the Asian session today, bond markets were once again under the pump.
Australian bonds took another hammering in the aftermath of yesterday’s 25 bp hike by the RBA. The short-end of the curve was most impacted, with the 3-year bond now yielding over 3.10%, up 40 bp from this time last week.
Gold remains under pressure trading near US$ 1865 an ounce. Metals have generally been weakening this week as global growth concerns mount over rising interest rates and Chinese lockdowns. RBNZ Governor Adrian Orr also cited a possible global recession looming.
Crude oil is slightly firmer with the WTI futures contract around US$ 103.50 bbl and the Brent contract near US$ 106 bbl.
Wall Street saw small gains overnight and the futures market is pointing to an equally subdued start to the cash session.
Most APAC equities were similarly quiet, with the exception Hong Kong’s Hang Seng index (HSI). The SEC announced another probe into Didi’s 2021 IPO and as a result, the HSI tech index tanked, down over 3% today.
The Fed will hold centre stage today.
The full economic calendar can be viewed here.
GBP/USD Technical Analysis
GBP/USD made a 2-year low at 1.2411 last week, not far from the July 2020 low of 1.2360. These two levels may provide support.
On the topside, the recent high and pivot points of 1.2615, 1.2676, 1.2854, 1.2982 and 1.3000 could offer resistance.
— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter