ForexLive European FX news wrap: BOE hold rates, dollar falls as equities jump post-Fed

Headlines:

• BOE leaves bank rate unchanged at 5.00%, as expected
• Dollar struggles on the session, equities ramp higher as well
• Weekly update on interest rate expectations
• Fed still on track to cut rates by 125 bps in total for 2024 – Citi
• Goldman Sachs now sees Fed cutting by 25 bps at each meeting until June next year
• ECB’s Schnabel: Sticky services inflation is keeping headline inflation at elevated level
• Eurozone July current account balance €39.6 billion vs €50.0 billion prior
• Switzerland August trade balance CHF 4.56 billion vs CHF 4.89 billion prior

Markets:

• AUD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 1.7%
• US 10-year yields up 2.4 bps to 3.709%
• Gold up 1.1% to $2,587.63
• WTI crude up 0.9% to $71.58
• Bitcoin up 3.9% to $62,558

The central bank bonanza continued with the BOE today and as expected, they left the bank rate unchanged at 5.00%

The pound still rallied in the aftermath though, briefly nudging above 1.3300 to its highest levels since February 2022. GBP/USD is still up 0.6% on the day, keeping closer to 1.3285 currently. The BOE signaled that they remain comfortable in keeping policy restrictiveness and the bank rate vote also revealed just one dissenter (Ramsden did not vote for a rate cut this time).

The odds of a 25 bps rate cut by the BOE for November fell as such. It is now seen at ~63%, down from having been fully priced in before this.

As for the bigger picture in markets today, it’s all about the post-Fed digestion. And that is seeing the dollar fall as equities are soaring on the day.

USD/JPY might be sitting higher as long-end yield are holding up but that’s the only consolation for the dollar. The pair did drop to a low of 142.03 in European morning trade but picked itself up to sit closer to 143.00 now.

As for other dollar pairs, it was more of a straightforward story as the greenback weakened across the board.

EUR/USD moved up from 1.1120 to 1.1160-70 levels while USD/CAD fell from 1.3600 to 1.3533 before holding just above that now. The antipodeans are the ones running away with things as AUD/USD climbs to its best levels for the year. The pair is up 0.9% to 0.6826 now and just off the high earlier of 0.6839.

In the equities space, European indices are posting gains above 1% now with the CAC 40 even bordering near 2% gains on the day. US futures are also ripping higher with S&P 500 futures up 1.7% and Nasdaq futures up 2.2% on the day. After some trepidation yesterday, investors are liking the fact that the Fed did give in to markets with the 50 bps rate cut.

As for commodities, gold is nearing fresh record highs again in a push to $2,587 currently. Meanwhile, silver is up over 3% to above $31 and testing its highest levels since July.

Coming up, we’ll have the US weekly jobless claims to add to the mix.

This article was written by Justin Low at www.forexlive.com.