In fact, US futures are even extending losses on the day now. Here’s a snapshot of things:

• Eurostoxx -1.4%
• Germany DAX -1.1%
• France CAC 40 -1.4%
• UK FTSE -0.2%
• S&P 500 futures -0.7%
• Nasdaq futures -1.0%
• Dow futures -0.5%

So, what’s the cause for the lack of cheer in stocks even as the SNB and BOE surprised by staying on hold today? Well, it’s all about the bond market.

And 10-year Treasury yields are still keeping higher by 3 bps today to 4.441% at the moment. As bond yields continue to shoot higher, that is going to keep creating more angst for equities. So, just be mindful of that ongoing development when reviewing broader markets and the central bank decisions this week.

This article was written by Justin Low at www.forexlive.com.

And so the BOE now officially joins the ranks of all the other major central banks into pausing their tightening cycle. The gang is complete again, after having seen the SNB surprise earlier in the day as well. So, what exactly is the impact to the pound as the BOE takes a step back from hiking rates?

In terms of OIS pricing, the most evident one is a shift lower in the curve. In other words, traders are not as convinced of that one last rate hike by the BOE now. This was supposed to be a one and done case for the central bank but it now seems like maybe there could be an option where they still hike in November before officially pausing for good.

However, that will be largely dependent on the data in the coming weeks/months.

As things stand, the fact is that the UK economy is worsening at a much rapid pace than anticipated back in May or June. The BOE has also acknowledged that and says that they now see Q3 GDP growth of just 0.1% (previously 0.4%).

The thing is if we see the same kind of unpleasant showing in the economy in Q4, it just makes it that much harder for the BOE to try and convince markets that they can still get away with another rate hike. Otherwise, the risk is that they might overtighten policy and send the economy over the edge and administer a hard landing instead.

We’re not quite at that point of no return yet but with every passing data point and especially if labour market conditions also soften, we are slowly getting there.

The pound has fallen on the initial reaction with GBP/USD down from 1.2295 to 1.2240 but has now recovered some ground to 1.2265. Traders were seeing this as a 50-50 decision coming into today but the fact that the November window is still left open somewhat, means that we’re only seeing a slight shift in pricing odds.

That isn’t as damaging to the pound but it still points to further downside for the currency, especially if economic conditions show no signs of getting any better i.e. traders will have to keep slowly pricing out odds of another rate hike eventually.

This article was written by Justin Low at www.forexlive.com.