England’s central bank is expected to announce its decision on interest rate hikes tomorrow. With soaring inflation numbers, the BoE is expected to raise the interest rates by 50 basis points or 0.50% - its largest single hike since 1995. This comes against the backdrop of a 40-year inflation high of 9.4%. Prices for food and energy are skyrocketing, worsening the already existing cost of living crisis in the country.
Based on a Reuters poll conducted with 65 analysts and economists, 70% are convinced that the BoE (Bank of England) will increase the rates by 50 basis points. Not all members of the MPC (Monetary Policy Committee) are expected to agree on a more hawkish decision, but analysts predict that the majority will vote in favor of a 0.50% hike.
The Pound appears to be edging higher on Wednesday ahead of the rate decision. The GBP/USD pair refreshed its daily high in the European session, with bulls eyeing to push the pair past the 1.2200 mark. The markets appear to be divided over the interest rate decision so investors will be focusing more on the closer-term economic outlook for the UK.
The US Dollar dropped to a two-month low against the Japanese Yen on Tuesday. But the US Dollar Index, which measures the performance of the US Dollar against six other currencies, was trading at 105.440, or 0.1% higher. This indicates that the currency pair slid because the Yen strengthened rather than because the Dollar weakened. In fact, traders turned to the safe-haven Dollar in light of the rising political tensions between China and the US. Following Nancy Pelosi's visit to Taiwan, demand for the Dollar rose, pushing other currencies down. EUR/USD was down 0.2% to 1.0236, while GBP/USD had shed 0.3% and was trading at 1.2207.
Comments from several Fed officials on Tuesday reassured investors that the central bank would proceed with its hawkish approach towards inflation. This prompted the rise of the US 10-Year Treasury Note to 2.756%, and the 30-Year Treasury to 3.015%. Traders will be paying close attention to comments and hints from the Fed.
Oil prices fall ahead of OPEC+ meeting on Thursday. There have been various reports from sources saying that the group is not likely to increase the output, but if they did, it would be a very small increase. Brent crude futures were down 1.3% at $99.20 a barrel, while West Texas Intermediate (WTI) crude futures fell 1.4% to $93.14 a barrel.
The group faces a lot of pressure from the US to raise oil production, but several members of the group said they were tired of exhausting their out and concerned that if a major catastrophe happens, there wouldn't be enough oil to supply. According to analyst Stephen Brennock, "Even if the OPEC+ group did declare a small increase, the gesture would be largely symbolic given that very few members have the capacity to materially increase production."
On the other hand, one of the group members, Kazakhstan, says that the group might have to raise output to prevent the market from ‘overheating’ as prices have soared to $100 per barrel. This is yet another economic development that traders will be on the lookout for this week.
Copyright © 2022 – All rights reserved.
NAGA is a trademark of The NAGA Group AG, a German based FinTech company publicly listed on the Frankfurt Stock Exchange | WKN: A161NR | ISIN: DE000A161NR7.
Any trademarks appearing on this website are the property of their respective owners.
The NAGA Group AG is the holding company of various companies, such as NAGA GLOBAL LLC, NAGA MARKETS EUROPE LTD, NAGA Technology GmbH, NAGA Pay GmbH and has a close link with NAGAX Europe OÜ.
RISK WARNING: Derivatives are complex instruments and come with a high risk of losing money rapidly due to leverage. A high percentage of retail investor accounts lose money when trading derivatives with this provider. You should consider whether you understand how derivatives work and whether you can afford to take the high risk of losing your money.
Trading with NAGA Trader by following and/or copying or replicating the trades of other traders involves high levels of risks, even when following and/or copying or replicating the top-performing traders. Such risks include the risk that you may be following/copying the trading decisions of possibly inexperienced/unprofessional traders, or traders whose ultimate purpose or intention, or financial status may differ from yours. Before making an investment decision, you should rely on your own assessment of the person making the trading decisions and the terms of all the legal documentation.
Restricted countries: NAGA Group AG does not provide services for the residents of certain countries, such as Afghanistan, Albania, American Samoa, Australia, Barbados, Belgium, British Virgin Islands, Burkina Faso, Cambodia, Canada (including Quebec), Cayman Islands, Central African Republic, Congo, Democratic People's Republic of Korea, Democratic Republic of the Congo, Gibraltar, Guam, Haiti, Iran, Iraq, Isle of Man, Israel, Jamaica, Jordan, Libyan Arab Jamahiriya, Mali, Monaco, Morocco, Myanmar, Nicaragua, Philippines, Russian Federation, San Marino, Senegal, Serbia, Somalia, South Sudan, Sri Lanka, Syrian Arab Republic, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Kingdom, US Minor Islands, US Virgin Islands, USA, Vanuatu, Yemen, Zimbabwe.