BOE up next 50 or 75- will it matter.
Risk suffers as the USD roars.
Well that was a late night as the markets hung onto every word Powell had to say at his press conference then delivered a swift verdict. Stocks tumbled, the USD soared to new highs across the board and Crypto took a late battering to leave us opening at some ugly levels this morning. A 75 Bps hikd and an indication of 100-125 more to come this year was not hugely surprising but the manner in which Powell reiterated his Jackson Hole testimony and the fact he went out of his way to avoid any hint of a dovish pivot was the driving force behind the moves.
So where now? Well, It is hard to look past buying USD dips and selling Euro rallies still. The BOJ has held rates unchanged overnight and walked back on intervention threats. Usd/jpy looks the cleanest play and a test of 150 is on the cards. The Euro is making fresh lows for the year and will look to test 0.9700 before month end in all likelihood. This leave poor old GBP/USD which actually moved the most yesterday and opens near 1.1200 today. The BOE is next up in the CB parade at 12pm and if they “only” raise 50Bps a test of 1.1000 soon looks favourite. That said, I think they will raise 75 myself which could see a short squeeze but with Truss making widely criticised economic policy announcements it is hard to see how a bounce is anything more than temporary in the short term.
Crypto was steady for a large part of yesterday, even trying to rally at one point during the testimony, before succumbing to a late sell off which saw 18,000 and 1220 given a test. I actually find myself adding to long term investments at these levels but in the short term the ingredients for a bounce are almost all missing so more pain may be on the horizon.
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