EUR/USD, EUR/GBP flows - twin themes continue, BoE up next
Oil reset, chip pressure remain two of the big themes out of the election
FX still biased towards position corrections
BoE up next, relatively dovish (or non-hawkish) hike expected
Twin themes out of the US election remain in place, with oil completing its biggest drop in 6 years yesterday back down in the mid $80 Oct lows for US crude, while AI chip/build out stocks maintain their concerns (Kospi for instance -5%, towards the summer YTD lows).
Net result remains some position unwinding in FX (EUR, NZD, AUD..) and the dollar overall somewhat lower albeit DXY still currently holding the 101/101.80 support thus far. NOK also subject to retracement profit taking pressures if the oil move sticks and especially extends through the current support.
Focus today turns to the BoE where a reasonably ‘dovish hike’ is expected. While the Bank will reluctantly move, it continues to see underlying price and labour market conditions as fairly benign, while even hawks have expressed scepticism over the path of tightening priced in. Cable looks to have room to extend higher on the wider backdrop and chart setup, so if there is to be any intraday ‘sell the fact’ then it would probably have to come via euro squeeze running ahead of sterling and lifting the cross.