Special report: BOE Decision Preview
Today’s report: Dollar still trying to hold on
There have been some doubts from some Fed officials as to whether policy is restrictive enough, and given things have been otherwise rather quiet, these doubts along with a healthy upward revision to the Atlanta Fed GDP model have forced some reconsideration of Fed bets, albeit mild, back in the hawkish direction.
Wake-up call
- German IP
- policy decision
- hawkish tone
- rate outlook
- jobs report
- FinMin Willis
- inflation outlook
- Macro themes
Peformance chart: 30-Day Performance vs. US dollar (%)
Suggested reading
- How Much Gold Does China Hold? Doesn’t Matter., Fisher Investments (May 5, 2024)
- The Forecasting Record of The Fed & The Market, T. Slok, Apollo Academy (May 7, 2024)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The Euro has been in a multi-month consolidation since bottoming out in 2022. Setbacks have since been exceptionally well supported on dips below 1.0500, with a higher platform sought out ahead of the next major upside extension. Look for a push through the 2023 high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.EURUSD – fundamental overview
Softer German industrial production data and some dovish ECB speak have been weighing on the Euro into Thursday. Key standouts on Thursday’s calendar come from the BOE policy decision, US initial jobless claims, and a batch of central bank speak.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 latest push to a fresh 2024 high beyond 1.2830 confirms the outlook and opens the door for the next major upside extension towards the 2023 high at 1.3143. Any setbacks should now be well supported ahead of 1.2000.GBPUSD – fundamental overview
No changes are expected from the BOE later today, though there will be plenty of focus on whether the central bank hits at a rate cut sooner than later. This is likely to influence price action on this Thursday. Key standouts on Thursday’s calendar come from the mentioned BOE policy decision, US initial jobless claims, and a batch of central bank speak.USDJPY – technical overview
The market remains confined to a strong uptrend, most recently extending to a multi-year high through 160.00. Key support comes in at 151.95, with only a weekly close below to delay the constructive outlook.USDJPY – fundamental overview
Interestingly enough, the BOJ Summary of Opinions had a hawkish tone and showed plenty of concern about the weaker Yen. Meanwhile, BOJ Ueda continued to do his part warning against excessive moves. And yet, even with all of this, the Yen continues to track with a heavy tone. Key standouts on Thursday’s calendar come from the BOE policy decision, US initial jobless claims, and a batch of central bank speak.AUDUSD – technical overview
There are signs of the potential formation of a longer-term base with the market trading down into a meaningful longer-term support zone. Only a monthly close below 0.6200 would give reason for rethink. Back above 0.6900 will take the big picture pressure off the downside and strengthen case for a bottom.AUDUSD – fundamental overview
On Wednesday, Westpac updated their forecasts and now see the RBA holding rates until later this year or beyond. Key standouts on Thursday’s calendar come from the BOE policy decision, US initial jobless claims, and a batch of central bank speak.USDCAD – technical overview
Above 1.3000 signals an end to a period of longer-term 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
A slumping commodities complex has been weighing on the Canadian Dollar, though we are starting to see some caution and positioning into Friday's Canada jobs report. Key standouts on Thursday’s calendar come from the BOE policy decision, US initial jobless claims, and a batch of central bank speak.NZDUSD – technical overview
Overall pressure remains on the downside with the market continuing to stall out on runs up into the 0.6500 area. At the same time, there are some signs of the market wanting to put in a longer-term base. Ultimately, a break back above 0.6500 would be required to take the medium-term pressure off the downside and encourage this prospect. A monthly close below 0.5800 will intensify bearish price action.NZDUSD – fundamental overview
Absence of first tier data out of New Zealand has left the Kiwi rate to trade on bigger picture themes. We did hear from FinMin Willis in her pre-budget speech earlier today. She said she didn't expect any windfalls before handing down the Budget, and that it would obviously not be a big-spending one. Key standouts on Thursday’s calendar come from the BOE policy decision, US initial jobless claims, and a batch of central bank speak.US SPX 500 – technical overview
Longer-term technical studies continue to look quite extended after pushing to fresh record highs, begging for a deeper correction ahead. Look for rallies to be well capped in favor of lower tops and lower lows. Next key support comes in at 4921.US SPX 500 – fundamental overview
Though we have seen a healthy adjustment of investor expectations towards the amount of rate cuts in 2024, the market still hopes policy will end up erring more towards the investor friendly, accommodative side of things. This bet has kept stocks well bid into dips and consistently pushing record highs. The trouble right now is that inflation has been showing signs of ticking back up, all while the market contends with additional uncertainty around geopolitical risk.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 1900 on a monthly close basis ahead of the next major upside extension towards 2500.GOLD (SPOT) – fundamental overview
The yellow metal has pushed record highs in 2024 with solid demand from medium and longer-term accounts. These players are more concerned about inflation, geopolitical 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 end.