On Sep 22 the BoE meets and will decide on how to best proceed with monetary policy. The BoE, like other central banks, is having to rapidly hike rates as it finds itself behind the curve to try and cool inflation as quickly as possible. Will the BoE hike by 50 bps or 75bps? A larger 75bps hike will signal the BoE is getting tough on inflation. The implied interest rate curve sees the BoE hiking interest rates to 4.5% in the summer of next year. Interest rates are currently at 1.75%, so there are plenty more hikes expected. One key question going forward is going to be when will the BoE signal a pause? Will it confirm a 4.50% terminal rate or push back against it?
If the BoE signals less aggressive action and hikes by less than expected/push back against a 4.5% terminal rate then the GBP could fall lower. This would favour the EURGBP upside with the ECB growing more and more hawkish to tackle eurozone inflation. This would also chime with a decent period of EURGBP strength around the end of September and the start of October.
Major Trade Risks: The major risk here is if the BoE takes a more hawkish stance and that could lift the GBP higher and invalidate this outlook.
High-Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure. *Any opinions made in this material are personal to the author and do not reflect the opinions of HYCM. This material is considered a marketing communication and should not be construed as containing investment advice or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. HYCM does not take into account your personal investment objectives or financial situation. HYCM makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast, or other information supplied by an employee of HYCM, a third party, or otherwise. Without the approval of HYCM, reproduction or redistribution of this information isn’t permitted.
Follow us on Telegram
Stay updated of all the news
EUR/USD drops toward 1.0700 after US jobs report
EUR/USD came under renewed bearish pressure in the second half of the day on Friday and declined toward 1.0700. Stronger-than-expected Nonfarm Payrolls (NFP) data helps the US Dollar gather strength ahead of the weekend and forces the pair to stay on the back foot.
GBP/USD extends slide below 1.2450 amid a stronger USD
GBP/USD dropped further and hit fresh daily lows below 1.2450 amid a stronger US dollar. The Greenback remains firm following the release of the US May jobs report. Despite losing almost 100 pips on Friday, GBP/USD is still on track for a weekly gain.
Gold falls below $1,960 as US yields rebound after US jobs data
Gold price turned south and declined below $1,960 on Friday. After the data from the US revealed that Nonfarm Payrolls rose 339,000 in May, the benchmark 10-year US Treasury bond yield gained more than 2% and recovered toward 3.7%, weighing heavily on XAU/USD.
China crypto community picks Ethereum, Arbitrum and BNB Chain as top protocols
Ethereum, Arbitrum and BNB Chain protocols are top picks for the Chinese crypto community, data from a report shows, a possible bullish catalyst for tokens related to these protocols as Hong Kong opens the door of crypto to retail investors.
LULU stock adds 15% on big Wall Street beat
Lululemon Athletica did it again. In something that has become quite predictable, LULU stock sailed 14.9% higher in Friday’s premarket to $377.20 after the prized athleisure brand posted a nearly 15% earnings beat for the first quarter.