GBPUSD prepares for BoE on Super Thursday, especially after Fed showdown

Traders react to the Fed announcements by dragging down the US Dollar on early Thursday while the softer yields and a lack of risk-negative news favored the cautious optimism in the market. Adding to that, the hopes of witnessing a sooner end to the war in Gaza and likely recovery in Asia, despite China’s sluggish moves, also seem to help the risk-takers of late.

However, the fears of witnessing another disappointment from the Bank of England (BoE), even if it defends the hawkish bias, seem to allow the GBPUSD traders to cheer a softer Dollar ahead of the event. That said, the NZDUSD rises the most among the G10 currency pairs while the USDCAD struggles amid mixed clues and unimpressive comments from the Bank of Canada (BoC) officials in the last few days.

Prices of gold and crude oil snap a three-day losing streak but lack recovery momentum as traders are waiting for Friday’s US jobs report while the bond buyers appear less convincing. Even so, the mildly positive US stock futures allowed the Asia-Pacific shares to edge higher while Wall Street closed in the positive territory for the third consecutive day.

Elsewhere, BTCUSD and ETHUSD buyers take a breather at the multi-month high while waiting for concrete reasons to back the rally ahead of the spot ETF approvals.

Following are the latest moves of the key assets:

• Brent oil bounces off the lowest level in a month to print mild gains around $86.70.
• Gold price snaps three-day downtrend near $1,986, up 0.20% intraday at the latest.
• USD Index drops 0.35% intraday to 106.30, printing the first daily loss in three.
• Wall Street closed positive and so did the Asia-Pacific stocks. The same helps equities in Europe and the UK to begin the day on a positive side.
• BTCUSD and ETHUSD both pare recent gains around $35,200 and $1,830 as we write.

US Dollar drops after FOMC

In its latest monetary policy meeting, the US Federal Reserve (Fed) matched market forecasts of keeping the current Fed rates unchanged while pushing back the rate cut expectations. However, Chairman Jerome Powell weighed down the US Dollar by suggesting the late impact of tighter monetary policy and two-sided risks with inflation. The same dimmed expectations of witnessing one more rate hike in 2023.

Ahead of the Fed, the softer US data paved the way for the US Dollar’s retreat, after rising in the early week. That said, US ADP Employment Change came in below expectations to 113K versus 89K prior while the ISM Manufacturing PMI dropped to a three-month low of 46.7 from 49.0 prior. It should be noted, however, that the US JOLTS Job Openings for September improved to 9.553M versus 9.25M expected and 9.497M prior (revised). With this, the US Treasury bond yields reversed the early-week rebound and dropped more to favor the riskier assets like commodities and Antipodeans.

On a different note, the receding fears of Gaza and the early latest World Gold Council (WGC) report suggesting heavy physical Gold demand also favor the short-term Gold buyers while the GBPUSD cheered the US Dollar’s weakness amid mixed clues.

It should be noted that the lack of hawkish tone from the BoC officials and the mixed Aussie data couldn’t much help the USDCAD and AUDUSD bulls even as these currency pairs are firmer for the week.

Talking about the cryptos, BTCUSD retreats from the highest level since May while the ETHUSD prints mild losses at a three-month high as bulls want more than cyclical signals and hopes of ETF approvals to defend the latest run-up.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

BoE, US Factory Orders to entertain traders

Moving on, the Bank of England’s (BoE) monetary policy meeting details and the US Factory Orders for September should be watched carefully for clear directions. While the BoE is likely to keep the current monetary policy unchanged and weigh on the GBP, any mention of the economic hardships will strengthen the bearish bias about the Cable. On the other hand, firmer US data can help the US Dollar to better prepare for Friday’s NFP, now that the early signals are weak and the Fed has disappointed the Greenback bulls.

May the trading luck be with you!