STERLING GAINS AHEAD OF THE LATEST BOE RATE DECISION

The British pound rose slightly against the euro as traders waited for the latest interest rate decision by the Bank of England. The BOE finds itself in a difficult situation considering the UK economy is struggling as evidenced by the GDP and jobs numbers published this week. It contracted for the second straight month in April and analysts believe that the same trend happened in May. At the same time, inflation remains at elevated levels. As such, the bank will likely deliver a bearish rate hike.

The Swiss franc continued retreating against the euro and the US dollar ahead of the SNB decision. The bank is expected to leave interest rates unchanged at -0.75%, where it has been in over a decade. Still, with inflation rising, analysts believe that the bank will deliver its first hike in September. The decision comes a day after the State Secretariat for Economic Affairs (SECO) downgraded the country’s economy. It cited the ongoing war in Ukraine and the surging prices. It now expects that the economy will grow by 2.6% this year from the previous estimate of 0.75%.

The US dollar jumped against key currencies after the Fed delivered a hawkish interest rate decision. The bank decided to hike interest rates by 0.75%, as most analysts were expecting. Having misjudged the current phase of inflation, the bank’s dot plot showed that officials were expecting further hikes this year. At the same time, they believe that the current inflation phase will continue because it is coming from the supply side. The decision came at a time when Joe Biden is preparing a meeting in Saudi Arabia to discuss oil prices.

EURGBP

The EURGBP pair declined sharply ahead of the upcoming BOE decision. It dropped to a low of 0.8600, which was lower than this week’s high of 0.8720. It moved below the middle line of Bollinger Bands. The current price is slightly above the important support at 0.8592, which was at the highest point on June 9. Also, the MACD has formed a bearish crossover while the Williams % Range has moved below the overbought level. Therefore, the pair will likely continue falling.

EURJPY

The EURJPY pair continued dropping as the Japanese government seeks to intervene and boost the yen. It dropped to a low of 139.75, lower than this year’s high of 144.25. It has moved below the 25-day moving average while the RSI and the Average Directional Movement Index (ADX) are falling. The pair will likely continue falling as bears target the intersection of the ascending white trendline at 138.80.

EURUSD

The EURUSD pair rose after the Fed delivered its biggest rate hike in 28 years. It rose to a high of 1.0450, which was the highest level since Tuesday. It managed to move below the support at 1.0395. It is still below the 25-day and 50-day moving averages while the RSI has moved slightly above the oversold level. Therefore, the pair will likely resume the bearish trend as the European economic weakness continues.