What we are looking for

  • USD starting to hint at recovery: With ever more Fed members coming out with hawkish comments, there is a potential for the USD to build support again.
  • Indices continue to break higher: Another Wall Street breakout last night, with European indices mixed to slightly higher early today. US futures are a little cautious this morning but the positive trends remain intact.
  • Mixed commodities: Gold continues to recover, but oil is increasingly pressured to the downside.
  • Data trading: The Bank of England decision comes with some uncertainty over a 25 or a 50 basis points hike. Consensus is suggesting the more hawkish 50bps. We expect volatility on the announcement, whilst further volatility throughout the press conference. US jobless claims will drive USD positions. The higher the number of claims, the more negative the impact on the USD.


Another strong session on Wall Street saw the S&P 500 closing at almost two-month highs. However, the continual flow of hawkish rhetoric from Fed speakers is having an impact on bond markets. Yields have picked up and there is a degree of support that is threatening the USD once more. These are moves that will certainly be watched. If yields and the USD start to sustainably move higher again, then indices will face a significant headwind to the recovery. 

The geopolitical risk of House Speaker Pelosi’s visit to Taiwan has been elevated but is starting to ease slightly in the past 24 hours. However, markets will be watching how belligerent the posturing of China’s military presence is off the coast of Taiwan. This is likely to become more of a risk on the backburner though. Attention will be on the Bank of England today. It will continue the run of rate hikes, but just how hawkish can it be? For now, GBP is looking fairly settled, but the volatility will be elevated later.

The Bank of England is the key announcement on the economic calendar. There has been some uncertainty coming into this decision today, but the consensus is leaning for a more hawkish 50bps hike (+0.50%). Inflation and growth projections will also be key today. The US Weekly Jobless Claims are expected to continue to climb. Not only have claims been rising for the past 8 weeks, but they have also come in above forecast for 8 weeks in a row too.

Today’s news

Market sentiment still looks positive: Equity indices are higher again, whilst the USD gains of the last couple of days have eased this morning. 

Treasury yields have ticked lower: After the rebound of the past couple of days, longer-dated Treasury yields have just eased lower in early moves today. It is interesting to see the 2s/10s yield spread continues to move ever deeper into negative territory, now -37bps (-0.37%)

Oil remains pressured: OPEC opted for a small 100,000 output increase yesterday, with oil falling yesterday and again this morning. 

FOMC dove talks down rate cuts: Neel Kashkari (the most dovish FOMC member, voter in 2023) has talked down the prospect of rate cuts in 2023 (which is what interest rate markets are suggesting). He says rate hikes followed by holding rates steady are far more likely.

Cryptocurrencies slip back: After rebounding yesterday Bitcoin has slipped back again today. Trading -1.5% lower the price is back to $23,000.

More Fed speakers to watch for: Loretta Mester (very hawkish, 2022 voter) speaks at 16:00 GMT. Mester was hawkish on Tuesday and is likely to continue this line.

Economic Data:

  • Bank of England monetary policy (11:00 GMT) – The consensus is expecting a rate hike of +50 basis points to 1.75% (from 1.25% previously) 
  • US Weekly Jobless Claims (12:30 GMT) – Claims are expected to continue to rise to 259000 in the past week (from 256000) 

Major markets outlook

Broad outlook: Sentiment looks positive still. This leads to a positive bias on indices, whilst the USD is just unwinding slightly.

Forex: JPY and USD are slightly underperforming. With a risk positive bias, AUD and NZD are the main outperformers, whilst GBP is positive ahead of the Bank of England.

  • EUR/USD is still chopping around in a mini trading range between support at 1.0095 and resistance at 1.0293 as consolidation continues. We remain cautious of backing a recovery as the RSI remains stuck under 50 and the multi-month downtrend is intact. Losing the important higher low support at 1.0095 would re-open parity again. The market has ticked higher today to protect the support but there is a lack of intent.
  • GBP/USD has unwound back to the support of the three-week uptrend. Holding on to this trend will sustain the positive bias, but the Bank of England is a significant risk factor today. Technically, with the RSI holding above 50 the outlook is still positive and weakness is being bought into. Support at 1.2060 is key to this continuing. Initial resistance is 1.2207 and then 1.2293. 
  • AUD/USD has regained some support following the RBA decision The support at 0.6875/0.6910 has held well and the market is pushing higher again. The RSI picking up from 50 on the daily chart is also encouraging. e looking for whether this is a chance to buy. Holding above 0.6965 resistance would open a test of the 0.7045/0.7070 resistance again. 

Commodities: Gold is holding up well, but silver is starting to slip. Oil has once more turned into a frequent swing trade.

  • Gold has started to build higher again having pulled back from $1788 on Tuesday. Picking up from $1754 not only forms a recovery uptrend but also strengthens the breakout support at $1745/$1752. It will put the pressure back on the $1785/$1805 resistance band too. Breaking the five-month downtrend would also add to the improving outlook, as would the daily RSI holding above 50.
  • Silver has started to find support again in the past 24 hours. However, with the recovery stalling around the overhead supply resistance at $20.45/$20.60, the next move becomes important. Another bull failure under $20.45/$20.60 opens the prospect that this is a struggling recovery that may find a new round of selling. The market needs to build support, ideally above the $19.48 breakout, to build on recovery momentum. The RSI holding above 50 would help. Initial support is at $19.77.
  • Brent Crude oil has posted another intraday bull failure around $106.25/$106.50. A subsequent break below $101.60 now heaps pressure on $98/$100 which are the old multi-month range lows. The daily RSI consistently failing around 50 (where recent rallies have faltered) suggests selling into strength. 

Espresso Morning Call: Positive bias to sentiment, BoE eyed

Indices: Wall Street has reacted strongly once more as the buyers see weakness as an opportunity. European indices also look strong.

  • S&P 500 futures have once more driven higher as near-term weakness is seen as a chance to buy. Another strong bullish candle will have traders eyeing the key May resistance at 4201.  With a four-week uptrend of higher lows, we look to use this now as a basis of support. Initial support is at 4080 and strengthening between 3994/4042. 
  • German DAX has built from the support band between 13330/13440 to break out once more. A four-week uptrend is now a basis of support. With RSI momentum increasingly strong into the 60s, the outlook continues to improve. A test of the 13665/13735 resistance is underway. A continued move higher would open 14250/14300. 
  • FTSE 100 is holding the breakout above 7370 but is not matching peers such as the DAX and Wall Street in its recovery. Resistance at 7474 is holding as the market is consolidating this morning. Despite this, there is a positive bias following the break above 7370, with the RSI in the high 50s and good support in the band 7335/7370. Near-term weakness looks to be a chance to buy. 

Espresso Morning Call: Positive bias to sentiment, BoE eyed

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.