Special report: BOE policy decision preview
Today’s report: Currencies and stocks part ways post Fed
The Fed decision has come and gone. In the end, the central bank delivered an as expected 25 basis point rate hike, but at the same time, largely let down investors after stating additional policy firming may be appropriate.
Wake-up call
- hawkish message
- Hot CPI
- Yield differentials
- Commodities prices
- more dovish
- Kiwi recovers
- Inflation headache
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- Stuck in a Time Warp With Janet and Jerome, J. Authers, Bloomberg (March 23, 2023)
- Boeing's pioneering flight plan for green fuel jets, M. McCormick, FT (March 22, 2023)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The Euro remains well supported on dips following a run to the topside through 1.1000 earlier this year. Any additional setbacks should be well supported ahead of 1.0500 in favor of the formation of the next major higher low and a bullish continuation. Ultimately, only a monthly close back below 1.0500 would give reason for concern.EURUSD – fundamental overview
The Euro has extended the run as the ECB continues to push the hawkish message, while offering liquidity assurance. Lagarde was on the wires saying there was no trade off between price and financial stability, while adding the ECB communicated a clear upward path on rates. Key standouts on Thursday’s calendar come from the BOE policy decision, and US reads in the form of initial jobless claims, building permits, the current account, Chicago Fed national activity index, and new home sales.EURUSD - Technical charts in detail
GBPUSD – technical overview
Signs have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September 2022. The recent weekly close back above the September high at 1.1739 strengthens this prospect. Any setbacks should now be well supported ahead of 1.1500. Next key resistance comes in at 1.2668.GBPUSD – fundamental overview
The Pound got another boost on Wednesday after CPI reads came in hot, further pushing the odds of higher rates. Key standouts on Thursday’s calendar come from the BOE policy decision, and US reads in the form of initial jobless claims, building permits, the current account, Chicago Fed national activity index, and new home sales.USDJPY – technical overview
The major pair has seen a nice recovery following the massive correction out from multi-year highs. Setbacks have finally been well supported ahead of 125.00 in the 127s thus far. At this stage, it looks like the market could be wanting to resume the bigger picture uptrend and head back towards a retest of that multi-year high from October 2022 up at 151.95. Look for any weakness to continue to be well supported in favor of higher lows along the way.USDJPY – fundamental overview
The Yen was back rallying on Wednesday, with yield differentials and risk off flow factoring into the price action. Key standouts on Thursday’s calendar come from the BOE policy decision, and US reads in the form of initial jobless claims, building permits, the current account, Chicago Fed national activity index, and new home sales.AUDUSD – technical overview
There are signs of the potential formation of a longer-term base following the late 2022 surge back above 0.6500. The recent weekly close back above previous support now turned resistance at 0.6682 strengthens the outlook for a bullish structural shift. Next key resistance comes in at 0.7284. Setbacks should be well supported ahead of 0.6500.AUDUSD – fundamental overview
Commodities prices are holding up well, and the US Dollar has sold off post Fed, which has factored into the Aussie demand we've been seeing. Key standouts on Thursday’s calendar come from the BOE policy decision, and US reads in the form of initial jobless claims, building permits, the current account, Chicago Fed national activity index, and new home sales.USDCAD – technical overview
A recent surge back above 1.3000 signals an end to a period of bearish consolidation and suggests the market is in the process of carving out a more significant longer-term base. Next key resistance now comes in up into the 1.4000 area. Setbacks should be very well supported down into the 1.3000 area.USDCAD – fundamental overview
The Bank of Canada summary of deliberations showed it agreed to 'emphasize the conditionality' of its pause although it saw 'clear signals' hikes were impacting demand. The central bank acknowledged government spending grew more than anticipated in Q4 at 3.9%. There was no mention of a hike. Key standouts on Thursday’s calendar come from the BOE policy decision, and US reads in the form of initial jobless claims, building permits, the current account, Chicago Fed national activity index, and new home sales.NZDUSD – technical overview
Overall pressure remains on the downside with the market once again stalling out on a run up into the 0.6500 area. Ultimately, a break back above 0.6577 would be required to take the immediate pressure off the downside.NZDUSD – fundamental overview
The New Zealand Dollar has managed to shake off setbacks from the discouraging NZ deficit earlier in the week, instead focusing on rallying commodities and a weakening US Dollar. Key standouts on Thursday’s calendar come from the BOE policy decision, and US reads in the form of initial jobless claims, building permits, the current account, Chicago Fed national activity index, and new home sales.US SPX 500 – technical overview
Longer-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. A monthly close back above 4300 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in at 3763.US SPX 500 – fundamental overview
We've finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. Overall, we expect inflation to continue to be a problem in H1 2023 that results in downside pressure into rallies.GOLD (SPOT) – technical overview
The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1600 on a monthly close basis ahead of the next major upside extension. The recent break back above 1808 strengthens the bullish outlook. Next major resistance comes in at the record high from 2020 at 2076.GOLD (SPOT) – fundamental overview
The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about inflation risk and a less upbeat global growth outlook. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.