A prospect of Fed rate hike and an unexpected rate hike by BOE has brought some strength to U.S. dollar against its major counterparts yesterday. U.S. dollar rebounded a day after Fed Chair Jerome Powell backed more U.S. rate increases and as a spate of interest rate hikes by several central banks fuelled worries about global growth.
The Bank of England raised interest rates by a bigger-than-expected half a percentage point to fight stubbornly high inflation. The increase was the central bank’s 13th straight hike.
BoE’s Monetary Policy Committee (MPC) voted 7-2 to raise its main interest rate from 4.5% to 5%, the highest since 2008 and its largest increase since February, following stickier inflation and wage growth since policymakers last met in May.
Fed Chair Jerome Powell said two more U.S. interest rate hikes of 25 basis points each by the end of the year was “a pretty good guess.”
The Swiss National Bank (SNB) hiked its benchmark interest rate by 25 basis points to 1.75%, defying some market expectations of a bigger increase.
Chair Powell on Wednesday told lawmakers that the fight against inflation still “has a long way to go” and despite a recent pause in rate hikes officials were in agreement borrowing costs would likely still need to move higher.
Precious metals continued their recent fall yesterday also as a prospectus of Fed rate hike after recent testimony and Bank of England rate hike by a bigger-than-forecast margin, put pressure on the prices. Gold Prices dropped by 0.88% and settled at 58196, lowest levels since 17 March 2023. Silver prices plunged by 1.36% and settled at 68308.
Today, Gold futures having immediate support is seen at 57950-57750 and resistance is at 58350-58680..
Silver Future has resistance at 69250-70080 and support at 67800-67550.00.
Base metals off day’s high yesterday as a stronger dollar offset support coming from a sharp reduction in available stocks in warehouses registered with the London Metal Exchange (LME). Copper futures made a high 736.60 and settled at 726.85 down 0.74%. Zinc, Aluminum and Lead settled with a loss of 0.58%,1.55% and 0.82% respectively.
Technical Levels – Copper prices having immediate resistance at 732.50-738.50. On the downside support will be 718.50-714.50.
An unexpected rate hike decision by BOE has resulted in a more than 4.50% speculative plunge in crude oil prices yesterday. As concerns over the impact of a bigger-than-expected Bank of England rate hike outweighed a surprise draw in U.S. oil supplies.
The weekly reading on supply-demand for U.S. oil came on the positive side Thursday. But crude prices tumbled instead. In supply, U.S. crude inventories fell by 3.8 million barrels in the last week to 463.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 300,000-barrel rise.
U.S. gasoline stocks rose by about 480,000 barrels in the week to 221.4 million barrels, the Energy Information Administration (EIA) said, compared with analysts’ expectations in a Reuters poll for a 100,000-barrel rise.
Distillate stockpiles, which include diesel and heating oil, rose by about 430,000 barrels in the week to 114.3 million barrels, versus expectations for a 700,000-barrel rise, the EIA data showed.
MCX crude oil settled at 5705, down by 4.17%.
Technical Levels – Crude oil having immediate resistance at 5750-5760 above it 5845-5920. On the downside, support is seen at 5660-5545.00
Economic data and events to watch
U.K.
At 11.30am – Retail Sales m/m will be released. Data forecast to have a contraction by 0.2% against previous 0.5%.
At 2.00pm – Flash Manufacturing PMI. Data is foreseen at 46.9 slightly lower from 47.10.
Flash Services PMI. Data is foreseen at 54.8 lower from previous 55.10.
All above data could have a negative impact on the GBP.
Eurozon
At 12.15pm – ECB President Lagarde Speaks will have a strong impact on the market.
At 12.45pm – French Flash Manufacturing PMI and French Flash Services PMI set to release. Data is foreseen at 45.4 and 52.20 as compared to 45.70 and 52.50 respectively.
At 1.00pm – German Flash Manufacturing PMI and German Flash Services PMI will release. Data is foreseen at 43.6, 56.30 as compared to 43.20, 57.20 respectively.
At 1.30pm – Flash Manufacturing PMI and Flash Services PMI will release. Data is foreseen at 44.8, 54.40 as compared to previous 44.80, and 55.10 respectively.
All above numbers will have a volatile impact on the Euro.
U.S.
At 7.15pm – Flash Manufacturing PMI. Data is foreseen to increase by 48.6 from 48.4 previous week.
At same time Flash Manufacturing PMI will be released. Data is foreseen at 53.90 slightly lower from previous 54.90.
All above data will have a negative impact on the dollar.