"EURGBP, GBPUSD – the Bank of England is seen hiking rates at this Thursday’s meeting (...) "

[FXMAG]

Summary: The market was crushed to new cycle lows yesterday by the market more fully pricing in the risk of super-size hikes from the Fed at the FOMC meeting this Wednesday and in July, with a 75 basis point hike now seen as a certainty tomorrow and very likely for the July meeting. This would be the first time the Fed has hiked more than 50 basis points since 1994. Some argue that the Fed may need to shock the market with a 100 basis point move. This has the market increasingly concerned that the Fed’s accelerated tightening will lead to a recession. Crude oil holding up as supply concerns outweigh slowdown risks with gold challenged by sharply higher real yields.

What is our trading focus?
Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) were headed lower in yesterday’s session with Nasdaq 100 futures down 4.3% hitting a fresh new low for the cycle at the 11,327 level. The VIX forward curve is getting more inverted to levels around where a vicious volatility and liquidity driven selloff could start, so we remind everyone to be careful now. US equity futures are attempting a rebound in early trading hours here in Europe, which we believe is linked to the improvement in cryptocurrencies as no margin call on Microstrategy has surfaced despite Bitcoin breaking below 21,000.

Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) stabilised after an initial selloff following a massive risk-off day overnight in the U.S. Hang Seng Index was flat and CSI300 was down less than 1% as of writing. Alibaba (09988) was down 3% while Meituan (03690) climbed 2%. Semiconductors traded weak, with leading names down 2% to 4%. In addition to the prospect of a more hawkish Fed, potential resurgence of COVID-19 breakouts and restrengthening of pandemic control measures in China is another risk that keep investors awake at night.

EURGBP, GBPUSD – the Bank of England is seen hiking rates at this Thursday’s meeting, with the market still leaning for a 25 basis point move, which looks out of touch with the market’s shift in the expected FOMC move this week. The Bank of England has loudly fretted the risk of an incoming recession and the unsuitability of its policy tools for addressing the cost-of-living and supply-side constraints that are dogging the UK economic outlook but may be forced to hike 50 basis points on Thursday to avoid the inflationary risks of aggravated currency weakness – and it will be interesting to watch whether that FX factor is rising in its observations. GBPUSD has poked to new cycle lows below 1.2150 ahead of the massive 1.2000 level, while EURGBP has remained bottled up below the key 0.8600 level.

https://www.fxmag.com/forex/eurgbp-gbpusd-the-bank-of-england-is-se...