- Australia's ASX 200 index rose by 112.4 points (1.55%) and currently trades at 7,370.20
- Japan's Nikkei 225 index has fallen by 316.07 points (-0.96%) and currently trades at 32,610.28
- Hong Kong's Hang Seng index has risen by 179.51 points (1.11%) and currently trades at 16,408.26
- China's A50 Index has risen by 3.64 points (0.03%) and currently trades at 11,194.55
UK and European indices:
- UK's FTSE 100 futures are currently up 65.5 points (0.87%), the cash market is currently estimated to open at 7,613.94
- Euro STOXX 50 futures are currently up 56 points (1.24%), the cash market is currently estimated to open at 4,586.19
- Germany's DAX futures are currently up 195 points (1.16%), the cash market is currently estimated to open at 16,961.05
US index futures:
- DJI futures are currently up 93 points (0.25%)
- S&P 500 futures are currently up 18.25 points (0.39%)
- Nasdaq 100 futures are currently up 93.25 points (0.56%)
We have arguably seen the biggest central bank surprise of the week, with the Fed’s dovish pivot. But that may also influence the tone of the SNB, BOE and ECB at their meetings today – even if only to a degree.
SNB meeting: The strength of the Swiss franc is likely to be a growing concern for the SNB, given it briefly rose to a an 8-year high against the euro last week. And whist the expectation is for the SNB to hold rates today, lower levels of inflation, a dovish pivot from the Fed and higher currency may be reasons to expect a change of policy soon. At the very least, they could mention concerns over the stronger franc, which could be the prelude to intervention or a lower interest rate.
BOE meeting: The Bank of England are the third major central bank likely to hold interest rates steady this week, even though calls for cuts are growing as economic data continues to soften. Yet interest rates swaps are currently pricing in 200bo of cuts form the BOE next year, and traders will want clues that this remains a possibility. Only three MPC members voted to hike at the last BOE meeting, so two or less today could be taken as further evidence that cuts may be arriving sooner than later to weigh on GBP and potentially support the FTSE.
ECB meeting: The latest round of weak data from Europe has rekindled concerns of a recession, prompting bond bulls to force yields lower in anticipation of an ECB cut. The odds of it happening today seem close to zero, and tat risks higher yields and therefore a higher euro should the ECB not deliver any sprinkles of dove. And as European markets are yet to fully react to the Fed’s dovish meeting, a higher euro now seems like the path of least resistance.
Events in focus (GMT):
- 08:30 – SNB interest rate decision
- 09:00 – SNB press conference
- 12:00 – BOE interest rate decision, MPC votes, meeting minutes
- 13:15 – ECB interest rate decision, policy statement
- 13:00 – US retail sales, jobless claims, import/export price index
- 13:45 – ECB press conference
EUR/USD technical analysis (1-hour chart):
The euro continued to advance higher during the Asian session following an extended rally on Wednesday. Yet bullish momentum is waning just above 1.090 and beneath the weekly R1 pivot, which makes a likely resistance area.
The 1-day implied volatility band has blown out of the daily chart, with the upper and lower bands sitting conveniently around the monthly R1 and S1 levels. The next big move for EUR/USD is likely down to whether the ECB match the Fed’s dovish pivot (to satisfy bears), or reveal nothing new to disappoint bears and send the euro higher with bond yields.
EUR/GBP technical analysis (daily chart):
The EUR/GBP cross also finds itself at a pivotal level heading into today’s BOE and ECB meetings. For a clear directional move we need to see a divergence between the two central banks relative to expectations. And with traders keen to seek dovish clues from both the BOE and ECB, it means we need just one of them no not deliver any such expectations to create a move.
For example, dovish ECB meeting coupled with a not dovish ECB meeting could send EUR/GBP towards the 0.8660 handle, near the 200-day EMA and 200-day average. Given the reluctance for the ECB to move policy in the past, I suspect this scenario may be the more likely.
However, if we’re treated to a dovish ECB meeting and not dovish BOE meeting, we may find a swing form around current levels.
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