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MTrading Team • 2023-03-23

GBPUSD bulls cheer Fed-led US Dollar weakness ahead of BoE

GBPUSD bulls cheer Fed-led US Dollar weakness ahead of BoE

It’s all about downbeat Treasury bond yields and the US Dollar as markets brace for monetary policy announcements from the Bank of England (BoE), Swiss National Bank (SNB) and Central Bank of the Republic of Turkiye (CBRT). That said, the Federal Reserve (Fed) couldn’t lift the greenback, nor the yields, despite announcing a 0.25% rate hike. The same joins mixed headlines surrounding banking sector turmoil in the US and Europe to propel the bond-buying and exert additional downside pressure on the US Dollar.

With this, the AUDUSD pair becomes the biggest gainer among the G10 currency pairs while USDCHF occupied the other end amid fears of SNB’s disappointment, despite hopes of witnessing a 50 bps rate hike. It should be noted that the EURUSD and GBPUSD renew a seven-week high while the USDJPY extends the week-start fall amid across-the-board USD weakness.

Gold price rise towards $2,000 while extending the previous day’s rebound whereas Crude Oil portrays a four-day uptrend amid cautious optimism and hopes of more energy demand from China. Further, Wall Street closed in the red but equities in the Asia-Pacific and Europe traded mixed.

BTCUSD and ETHUSD reverse the previous day’s losses while making rounds to the multi-day high marked in March.

Following are the latest moves of the key assets:

  • Brent oil rises for the fourth consecutive day to $76.10 at the latest.
  • Gold extends post-Fed gains towards $1,980, up 0.31% intraday as we write.
  • USD Index drops to the seven-week low of 101.90 during six-day downtrend.
  • Wall Street closed with notable losses but equities in the Asia-Pacific region, as well as shares in Europe and the UK, trade mixed afterward.
  • BTCUSD and ETHUSD reverse previous day’s pullback from the highest levels in nine and seven months respectively, near $27,700 and $1,755 by the press time.
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Fed’s dovish hike drowns US Dollar

A 25 bps rate hike from the Fed couldn’t lure the US Dollar bulls as the Fed statement suggests that the policymakers shift attention from more rate increases to policy pivot amid the banking crisis. The same joins Fed Chair Powell’s surprise for SVB fallout to drown the USD. It should be noted that US Treasury Secretary Janet Yellen’s rejection of blanket insurance for bank deposits contrasted with the market’s hopes of no 2008-like financial turmoil to weigh on the greenback and the US Treasury bond yields.

In contrast to the Fed, the ECB policymakers are quite hawkish and allow the EURUSD to refresh a seven-week high whereas expectations of a 0.50% rate hike from the BOE joined Brexit optimism to propel the GBPUSD prices. Additionally, AUDUSD justifies its risk barometer status as China-linked headlines suggest more economic positivity in the world’s second-largest economy, which in turn joined the previous day’s hawkish RBA minutes to propel the Aussie pair.

Gold rises for the second consecutive day to approach the key resistance surrounding $2,000 whereas Brent Oil portrays a four-day recovery from the lowest levels since December 2021. Further, Silver tracks Gold and Natural are also up while Copper and Nickel seem to keep the buyers hopeful.

Elsewhere, BTCUSD and ETHUSD consolidate fears emanating from the Fed’s rate hike and the US SEC’s readiness for more stringent laws to regulate the crypto business amid expectations of additional investments.

  • Strong buy: USDJPY
  • Strong sell: ETHUSD, GBPUSD
  • Buy: USD Index, USDCAD, Nasdaq, EURUSD
  • Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

More central bank actions eyed

Having witnessed the Fed-led moves, global markets are ready for the BOE, SNB and CBRT-inspired momentum. Although all these central banks are expected to sound hawkish, ex-CBRT, their outlook for future rate changes and banking sector turmoil will be crucial to watch for clear directions.

May the trading luck be with you!