Midday Brief – BoE policy meeting in focus

Markets experienced huge volatility early European session as investors continue to digest the Fed policy cycle ahead of US Labour data. Fed Chair Powell stressed the 75bps off the table as they plan to systematically use rates to curb skyrocketing inflation in the near term. BoE is expected to hike interest rates to a 13-year high amid the Russia/Ukraine war cloud.

USDCHF pared Wednesday’s losses by gaining +0.51% as investors continue to digest the Fed policy results ahead of the US labour force participation rate. Bulls face a 0.9800 psychological figure and a break above that resistance may renew bullish interests towards 0.99000, a 2-year high.

A failure to break the 0.9800 resistance may cause a corrective pattern towards 0.9700 support. Traders focus on US employment data due to release later in the New York session.

GBPCAD plunged by -1.25% breaking below a September 2019 low during the European session as the BoE policy meeting underpins pound strength. There is a general weakness in the pound despite the BoE hiking rates by 25bps to a 13-year high. A break below 1.5960 support may renew selling pressure towards 1.5800, a 7-year low. Bulls remain capped by the 1.6200 near-term barrier.

EURGBP rallied by +0.50% ahead of the Bank of England policy meeting. Bulls are challenged by the 0.8460 near-term high and a break above that area may renew bullish interest towards the 0.8500, 2022 high.

Inflation fears continue to rip through the Euro-area as inflation jumped to a 30-year high. Investors focus on BoE governor Bailey’s speech scheduled for release early in the New York session.

US equities futures trimmed gains after wild swings on Wednesday caused by Fed Chair Powell’s policy remarks. S&P 500 futures dropped by -0.50% as bulls face a near-term barrier at 4300 and a break above that area may open a possibility of reaching 4400.

Nasdaq futures trimmed Wednesday gains by -0.51% as upside gains remain challenged by 13600 near-term resistance. A bullish break of that area may renew a bullish appetite toward the 14000 psychological barrier. Dow Jones Industrial Index edged lower by -0.34% as 34000 psychological resistance continued to hold.

European stocks were mixed as investors shifted their focus to BoE policy meetings and earnings reports. CAC40 dropped by -0.40% as the index trades at a critical resistance at 6500. A break above that area will give room for further upside targeting 6600. DAX opened higher by +1.03% breaching the 14200 near-term barrier.

A price action gap between 13970 and 14151 may be filled before a remarkable direction unfolds. FTSE was flat after giving in earlier gains as investors remain cautious ahead of the BoE policy meeting.

Gold extended gains by +0.90% after breaching the 1880 near-term barrier. The yellow metal rallied as Fed Chair Powell shrugged off the 75bps hike off the table disappointing market expectations. Bulls are underpinned by 1900, a psychological barrier ahead of US employment data on Friday.