Spreadex Market Update
USD Rallies on Back of ECB & BOE Meetings
We saw plenty of volatility across markets yesterday with the BOE & ECB meetings and US earnings each causing plenty of price movement. The BOE hiked by a further 50bps, as expected with rates are now at 14%-year highs. Looking ahead, while the BOE still forecasts a UK recession this year, it now projects a shallower downturn than initially thought.
The ECB followed with a 50bps hike of its own while also signalling a further 50bos hike to come in March from that point the bank noted that it will evaluate the impact of tightening and make further monetary policy adjustments meeting by meeting on a data dependant basis. Both GBP and EUR moved lower on the back of the meetings. Despite ECB hawkishness, traders are already looking to gauge when the bank might reign in rate hikes, weighing on EUR upside for now.
Key Factors for Today
- USD back in favour ahead of NFP
- Equities rally as central bank monetary tightening looks to be coming to an end
- USD strongest performer today – GBP weakest
- Metals and oil both under pressure amidst uptick in USD
Coming Up
- USD – Non-Farm Payrolls
- USD – Average Hourly Earnings
- USD – Unemployment Rate
Equities Rally Following BOE & ECB Meetings
Equities saw solid gains across the board yesterday as, following the FOMC-driven weakness in USD, both GBP and EUR fell on the back of the ECB and BOE meetings. With traders now getting a stronger sense that monetary tightening will be concluding in coming months, markets were bolstered across the board. Attention now shifts to the US labour reports due today with the market looking for the headline NFP to come in at 193k from 223k prior.
US Stocks Higher Despite Earnings Misses
The rally in US stocks seems little phased by the weakness we saw from key US names yesterday. Apple, Amazon and Alphabet each reported weaker-than-expected earnings for Q4 while noting plenty of uncertainty in the early outlook for 2023.
USD Rallies Following BOE & ECB Meetings
The US Dollar is starting the day on a stronger footing on the back of the rally seen yesterday. Weakness in both GBP and EUR on the back of the BOE and ECB meetings yesterday has seen fresh demand for the Dollar. Today’s US labour data has the potential to drive the rally higher still if forecasts are satisfied or outperformed.
GBP Falls as Traders Eye End to BOE Tightening
GBP has been the weakest performer across the European open on Friday. While hiking rates by a further 50bps, the BOE noted that inflation has likely peaked in the UK with rates markets now anticipating an end to BOE tightening unless inflation spikes higher again.
Metals & Oil Turn Lower
In the metals and commodities space, gold and silver turned sharply lower yesterday amidst the uptick in USD. While still near highs, both metals look vulnerable to further downside today if USD rallies on better labour data. Crude prices are extending their losing streak today with futures prices back in the red as USD pushes higher.
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