BoE in focus after hawkish Fed

lmportant news this week:

• Thu, 18th, 08:00 CET UK Claimant Count Change.
• Thu, 18th 09:30 CET CH SNB Rate Decision.
• Thu, 18th, 13:00 CET UK BoE Interest Rate Decision.

FOMC shakes markets as higher-for-longer narrative returns

The latest FOMC meeting delivered a strong message to financial markets. While interest rates remained unchanged, the Fed signaled that the era of ultra-low interest rates is unlikely to return anytime soon. Inflation remains the primary concern, and policymakers appear willing to keep monetary policy restrictive for longer if necessary. This stance may clash with political expectations, particularly as President Trump continues to advocate for lower borrowing costs. For FX markets, the message is clear: the US dollar could remain supported if inflation stays above target and economic activity remains resilient.

Initial market reactions reflected a more cautious tone. Major USD pairs moved lower as the dollar gained traction, while Gold and Silver came under pressure. Crypto markets also weakened as traders reduced exposure to risk-sensitive assets. Despite the hawkish undertone, oil prices remained soft, helping to offset some inflation concerns. Importantly, not much has fundamentally changed, as interest rates have already been elevated for an extended period. Equity markets appear to recognize this, with the S&P 500 already showing signs of recovery after the initial reaction.

Market talk

Attention now shifts to today's Bank of England decision. Traders will closely monitor both the rate decision and any guidance regarding inflation and future policy moves. While the Fed delivered a firmer message, markets are already beginning to stabilize, suggesting that much of the higher-for-longer outlook may already be priced in. The rebound in equities despite weaker crypto and metals highlights that investors are not yet fully embracing a risk-off environment. For now, the US dollar remains the key asset to watch, as its direction will likely influence FX, commodities, and broader market sentiment over the coming sessions.

Tendencies in the markets

• Equities sideways, USD stronger, BTC weak, oil weaker, Silver sideways, Gold sideways.