Forex Today: Bank of England Rate Hike Expected Today

BoE guidance at its policy meeting today may matter more than the widely expected rate hike itself. With an increase already heavily anticipated by an expected vote of 7 to 2, traders will focus on whether policymakers endorse expectations of several further hikes or push back against them. The sharp fall in oil creates an additional complication: the Bank’s forecasts reflect earlier energy-price pressures, while markets are already reassessing the outlook using lower prices. A cautious message could therefore weaken Sterling even if Bank Rate rises. Meanwhile, in the Forex market, the GBP/USD currency pair is in focus as it powers higher to reach a new 7-week high price.

US stocks completed a strong bullish reversal yesterday as markets reassessed the implications of Democratic control of both houses of Congress. The S&P 500 Index gained 1.6%, its strongest session since August, the Dow Jones Industrial Average rose 3%, and the Nasdaq 100 Index advanced 0.9%. Falling oil prices and Treasury yields helped turn the initial election-driven selloff into a substantial rally, although technology shares continued to lag the broader market.

The election reaction has become a sector-rotation trade rather than a uniform recovery. Microsoft, Amazon, and Apple each rose more than 5%, but semiconductor shares remain under pressure as investors reassess the outlook for data-centre spending. South Korea’s KOSPI has fallen sharply again during today’s Asian session, while markets less concentrated in chipmakers have benefited from cheaper energy. This remains a mixed market, not a confirmed return to broad technology leadership.

WTI Crude Oil has plunged again as traders reduce the post-election war premium. Brent fell nearly 10% yesterday to below $100, while WTI dropped approximately 7.8% to $88.62. Markets increasingly believe the election result could increase pressure for a negotiated end to the Iran conflict, driven by comments by Vice President Vance blaming the heavy Republican defeat primarily on the Iran war. However, this is a repricing of expectations, not confirmation that a peace agreement has been reached.

WTI has begun trading below the important $87.68 support area again. The reversal from above $100 has brought prices back towards the level that held earlier in October. A sustained break below $87.68 on the same spot chart would be a significant bearish development; another successful defence could produce a rebound. Traders should take care not to apply that spot level mechanically to a different futures contract.

The US Dollar and Treasury yields have continued to fall. The Dollar Index is trading below 101.00 this morning at a 5-week low, while the US 10-year Treasury yield fell below 4.85%. Lower oil prices are easing inflation concerns, and expectations of political gridlock are encouraging a reassessment of future US spending. This is a meaningful change from the combination of Dollar strength and rising yields seen earlier in the autumn.

EUR/USD is not recovering very strongly, certainly not compared to its typically positively correlated currency the British Pound, suggesting relative weakness in the Euro. However, it is trading well above 1.1200, and a daily close above 1.1300 would be a bullish technical sign that will drive most trend traders, including me, to close their long-term short positions in this currency pair.

Bitcoin has reclaimed $80,000. It is trading around $80,500 after recovering from this week’s low near $75,700. The weaker Dollar, lower yields, and improved risk sentiment are supportive, but the potential for tighter regulatory scrutiny under a Democratic Congress remains a headwind. Holding above $80,000 would improve the immediate picture; it would not, by itself, restore the former bullish breakout setup towards $87,293.

Gold has broken back above $4,000, making a strong bullish breakout from a descending price channel which has been pushing the price lower for the past 2 months. This is a significant technical bullish development. The metal rose approximately 3.4% yesterday to around $4,063 as the Dollar and yields declined. This is a more convincing recovery than the tentative bounces seen earlier in the week, although a sustained hold above $4,000 is still needed. The next previously identified resistance is around $4,200.

Tomorrow’s (Friday) US employment report is the next major scheduled test of the Fed outlook and could move Gold, the US Dollar, and equity indices sharply.