By Lukman Otunuga, Research Analyst, ForexTime
Although the BoE kept policy measures and rates unchanged at its meeting today, it said it had explored plans to take interest rates into negative territory if necessary. The bank’s main scenario is based on the UK signing a Brexit trade deal before the end of the year, so the market has reacted strongly in light of the negative recent headlines and increasing risk of a no-deal. At one point, the GBP was one of the weakest major currencies on the day, down nearly 0.7% while money markets have been given little choice but to price in negative rates in early 2021.
Although it would seem that more QE and bond buying will take place ahead of negative rates, sub-zero borrowing costs are not just in the toolbox now, but briefings are taking place on how to implement them effectively. And that is the sixty-four million pound question as negative rates have failed to boost the economies of Japan and Europe, hurting the banking sector in the process who park their funds with the central banks.
The damage to Sterling has been done and the recent softening in the UK government stance by giving a veto to Parliament over some measures of the Internal Market bill doesn’t appear to be enough to change the odds so far of any kind of success in the trade talks. The 50-day Moving Average at 1.2993 was too much of a hurdle for Cable but the pair has found near-term support at 1.2850.
Fed aftermath leaves risk off, for now
Free Reports:
Sign Up for Our Stock Market Newsletter – Get updated on News, Charts & Rankings of Public Companies when you join our Stocks Newsletter
Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
The Dollar is consolidating its gains from overnight with US stocks opening firmly lower as the disappointment from last night’s meeting grows. The Fed delivered the minimum dovish statement on QE as the bar to ‘outdove’ itself and shake the prevailing stance was high. Chair Powell emphasised the steady profile of rates in the coming years and the fact that data has surprised to the upside is clearly positive, with the upcoming elections and the pressure now on government to do more.
Further out, in an average inflation targeting regime, what matters is continuously easier financial conditions, and this ultimately means the Dollar trading weaker in the Fed’s fight for higher inflation. DXY’s pop higher earlier this morning bumped up near to resistance at this month’s peak around 93.66. If prices continue to struggle, then bears will attack 92.70/80 as the first support ahead of the big figure.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
Article by ForexTime
ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com
- COT Metals Charts: Speculator bets led by Gold & Steel May 4, 2024
- COT Bonds Charts: Speculator bets led lower by SOFR 3M & 10-Year Bonds May 4, 2024
- COT Soft Commodities Charts: Speculator bets led by Wheat, Soybean Meal & Corn May 4, 2024
- COT Stock Market Charts: Speculator bets led lower by S&P500 & MSCI EAFE May 4, 2024
- The British index has updated the historical maximum. Oil lost 5% over the week May 3, 2024
- US Fed tilts towards a rate cut despite the postponement. HKMA left the rate unchanged at 5.75% May 2, 2024
- Brent crude oil hits seven-week low May 2, 2024
- Target Thursdays: USDJPY, Copper & EURCAD May 2, 2024
- WTI oil declines on rising inventories and negotiations between Israel and Hamas. Rising unemployment in New Zealand may force RBNZ to start cutting rates earlier May 1, 2024
- Bitcoin stumbles below $60k ahead of Fed May 1, 2024