Spreadex Market Update
June Rates Pricing for Fed Falls Following Soft CPI
Traders brace for further BOE Hike
The BOE is widely expected to hike rates again by a further .25% at today’s May BOE meeting. With the move broadly expected, focus will be on the latest forward guidance issued by the bank. Given that UK inflation remains elevated, traders are expecting a hawkish message from the BOE today and the clear signal that further tightening will be needed this year. If seen, GBP should remain well bid near-term. However, if the BOE strikes a more cautious tone on rates and falls short of signalling further tightening this will likely see GBP unwinding a little near-term.
Stock indices have been higher on the back of yesterday’s soft US inflation print. The tech sector in particular has been a strong beneficiary of the decline in US rate projections for next month. The Nasdaq closed over 1% higher on the day as traders focused on rate cut expectations later in the year. AI stocks in particular have been performing well with Microsoft (Open AI) seen hitting fresh highs for the year.
In FX, USD has seen the strongest start on Thursday, despite yesterday’s weak inflation data. Overnight, softer CPI data out of China has raised concerns over the economic rebound in the world’s second largest economy. On the back of weak trade data earlier in the week, investors are cautious over the Chinese economy which is likely diverting capital back towards USD on a safe-haven play.
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