• Yellen says will be meeting with senior bankers on debt ceiling next week
• Fed’s Bowman: Policy rate will need to remain sufficiently restrictive for some time
• ECB’s Nagel: Latest rate hike won’t be the last
• UK Q1 preliminary GDP +0.1% vs +0.1% q/q expected
• UK March monthly GDP -0.3% vs 0.0% m/m expected
• France April final CPI +5.9% vs +5.9% y/y prelim
• Spain April final CPI +4.1% vs +4.1% y/y prelim

Markets:

• GBP leads, NZD lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields up 2.3 bps to 3.419%
• Gold down 0.6% to $2,004.08
• WTI crude up 0.4% to $71.17
• Bitcoin down 2.4% to $26,351

It was a relatively quiet session as markets continue to trudge along after the US CPI data earlier this week. The prevailing narrative i.e. major central banks likely to pause their respective tightening cycles, is still the key theme but the economic releases this week isn’t adding or subtracting from that in the past few days.

The dollar remains steady with EUR/USD down 0.2% to 1.0890 as sellers try to test waters below the 1.0900 mark. Meanwhile, GBP/USD is up 0.1% to 1.2525 and staying little changed in general as UK Q1 GDP meets estimates.

The greenback is seen firmer slightly against the yen with USD/JPY up 0.2% to 134.80, with higher yields helping. Elsewhere, the antipodeans are lagging with NZD/USD down over 1% to 0.6225 after a plunge back below its 100-day moving average as the downside momentum gathers following softer RBNZ inflation expectations earlier today.

In other markets, equities are holding some optimism towards the end of the week but European indices are more or less closing the week where they started. In the commodities space, gold is trading lower and eyeing a test of the $2,000 mark again with silver down over 1% again after its sharp fall yesterday.

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

On the daily chart below for the
Nasdaq, we can see that the price is breaking above the key 12274 resistance, but the question now is whether
or not the buyers will be able to sustain it. The recent economic data has been
giving conflicting signals, but the market seems to be leaning on the
goldilocks scenario where the labour market remains resilient as shown by the
strong NFP report recently and inflation
slowly moderates towards the target as shown by the recent CPI coming in at 4.9% Y/Y. The big bullish
flag is still valid and if the buyers manage to sustain the breakout, the
target would be the 13000 level. A fakeout wouldn’t be good news, but the
sellers have more work to do before getting full control.

Nasdaq
technical analysis

On the 4 hour chart below, we can
see that the price has been ranging just beneath the key resistance for over a
month with just one failed probe at the end of April. This breakout is
significant but unfortunately it is not sustained by a fundamental catalyst as
the big miss in Jobless
Claims yesterday should make the market worry about a deterioration in the
labour market. Today we have the University of Michigan consumer
sentiment report and the market is likely to focus on the inflation expectations
figures as those ticked up considerably recently.

On the 1 hour chart below, we can
see more closely the range and the recent breakout. The buyers may pile in
again if the price pulls back to the broken top of the range. The sellers, on
the other hand, will want to see the price falling below the 12172 swing level
to start positioning for another possible selloff towards the bottom of the
channel.

This article was written by ForexLive at www.forexlive.com.

The yellow metal is down 0.7% today to around $2,002 at the moment, with the $2,000 mark now coming back into focus. That was where the Friday low held as buyers continue to try and look for further upside momentum – especially to try and get above the 2020 and 2022 highs around $2,070-75.

While a break back under $2,000 would be a blow to buyers, there is still some semblance of support around $1,975-81 for now and that will be a key spot to eye in case sellers try to make a move.

The drop in gold in the past few days comes as we see the dollar make a bit of a stand again with markets perhaps having hoped for a softer US CPI report to push the Fed pivot agenda.

I shared some thoughts here and there is very much a wait and see period in markets at the moment, as we await the next big data to validate or shift the prevailing narrative.

So far this week, gold isn’t really the most interesting chart among precious metals as silver is dealing with another 1.5% drop following yesterday’s sharp decline:

It is an interesting technical move after a bit of a double top pattern just above $26.00 and then the break of short-term support around $24.50-56 yesterday.

The 100-day moving average (red line) is next in line at $23.39 currently.

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

That will take the bank rate to 4.75%, although markets are pricing in the peak to be around 4.84% at the moment. One more rate hike is almost a given but a push towards 5.00% is still very much hanging in the balance – depending on inflation and economic developments in the UK.

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

• MPC factors this into its policy decisions
• Changes are still working its way through the economy
• Will adjust bank rate as necessary to return inflation to target sustainably
• GDP growth is still weak despite upwards revision

The topics posed by the Q&A so far are a bit of a dud, mainly just trying to question the BOE’s view on high inflation and the economy. These are questions that they should be well prepared for. GBP/USD is losing a bit of steam now, down to 1.2585 from around 1.2605 earlier.

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

• Food price inflation should ease but it remains uncertain
• Outlook for growth, unemployment has improved
• We have to stay the course
• Economic activity has been stronger than expected recently
• There has been greater resilience in the economy than what we anticipated
• We have good reasons to expect inflation to fall sharply from April
• We do see signs that food price inflation will start to slow

So far, he’s just explaining their view on the economic and inflation outlook – both of which I would say markets are already well briefed upon considering the developments elsewhere and also from UK data itself. The pound is keeping little changed as he speaks, with cable still hovering around 1.2600 levels at the moment.

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

• BOE raises bank rate by 25 bps to 4.50%, as expected
• What’s the takeaway from the BOE decision?
• What now after the US CPI data yesterday?
• Yellen: US default would produce economic, financial ‚catastrophe‘
• ECB’s Nagel reaffirms sticking to meeting-by-meeting approach
• ECB’s de Cos: We are now closer to the final cycle of rate hikes
• China April M2 money supply +12.4% vs +12.5% y/y expected

Markets:

• JPY leads, AUD lags on the day
• European equities mixed; S&P 500 futures down 0.1%
• US 10-year yields down 4 bps to 3.396%
• Gold up 0.4% to $2,037.13
• WTI crude flat at $72.57
• Bitcoin down 1.5% to $27,445

All eyes were on the BOE today and they delivered as expected, raising the bank rate by 25 bps without much of a hiccup.

There were some hawkish elements to the decision though, as they bumped up projections on inflation and also GDP forecasts. At the same time, the central bank is now not looking for a UK recession. As such, that helped to give the pound a minor lift in the aftermath of the decision.

GBP/USD sank earlier from 1.2620 to 1.2570 on a stronger dollar, before recovering slightly to 1.2600 now.

The dollar in general held firmer throughout the session despite some early resilience in equities, with EUR/USD falling from 1.0960 to 1.0920 and USD/CHF moving up from 0.8890 to 0.8950 before easing slightly.

The commodity currencies are the laggards with AUD/USD down 0.7% to 0.6730, after being pushed back by its 100-day moving average near 0.6800 once again.

The yen was somewhat steadier, although the gains were helped out by lower Treasury yields following the BOE decision. USD/JPY moved up to a high of 134.85 during the session but is now down 0.1% to 134.20 on the day.

There’s still a lot of pushing and pulling going on in broader markets and so far the not-so-surprising key risk events this week are not really offering much to work with in general.

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

Let’s try to keep this short and simple.

• There was a bump to the inflation forecasts and more notably, a big bump to GDP forecasts as well as the BOE abandoning their call for a UK recession
• The forward guidance reads more or less the same i.e. the door is still open to tighten further should inflation pressures require the need to do so
• The decision in itself was very much expected, that being a 25 bps rate hike with the same two dissenters again i.e. Dhingra and Tenreyro

So, where does that leave us?

Essentially, it shouldn’t be enough to convince markets to go above 5.00% pricing in the terminal rate. And with traders already having priced in a peak relatively close to that, the hawkish elements in today’s statement are not likely to provide too much of a boost to the pound.

We have seen GBP/USD move up from 1.2575 to 1.2600 now but to get past its one-year highs around 1.2660-66, I reckon it might take more and also a little bit of help from the dollar side considering today’s price action.

In terms of rates pricing, we have seen a minor bump higher in the OIS curve but not as hawkish as what we saw after the UK CPI data last month:

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

• Prior 4.25%
• Bank rate vote 7-2 vs 7-2 expected (Dhingra, Tenreyro voted to keep rates unchanged)
• If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required
• Risks to inflation forecasts skewed significantly to the upside
• Pay growth could plateau at rates inconsistent with inflation target
• Estimates „flat“ GDP for Q1 and Q2 (March forecast was -0.1% q/q for Q1)
• Full statement

Of note, the BOE has revised their projections to show a higher path for inflation as well as a big bump in terms of GDP forecast. That’s a bullish take at least, with the rest of the decision and forward guidance being consistent with what is expected and what we have seen from the central bank previously.

GBP/USD has caught a jump from 1.2575 to a high of 1.2615 before hugging closer to the 1.2600 mark now. As much as there are bullish elements to the report, I don’t see this skewing the market pricing all too much as a 5.00% peak in the bank rate has already been nearly priced in beforehand.

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

It is reported that China has asked banks to lower their rate ceilings on some retail and corporate deposits, starting from 15 May. And that the big four state-owned banks are to lower their rate ceilings by 30 bps, with some other financial institutions even called to cut by 50 bps.

If you recall, this builds on the story from two weeks ago here. This is largely to encourage more spending and investing activity in the country as the government is trying to prop up economic activity, instead of encouraging savings.

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