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A hawkish surprise from the Fed and now the BoE rate decision


3 November 2022

EUR/GBP is falling ahead of the BoE interest rate decision. The market has fully priced in a 75-basis point hike, the largest interest rate rise in over three decades. The decision comes as UK inflation sits at 10.1%, a 40-year high and as growth is expected to slow considerably. A recession, plus the tax rises and spending cuts expected from Rishi Sunak’s government, could mean that less aggressive rate hikes may be needed going forwards. Still, the BoE is flying blind, given that the government’s fiscal budget isn’t until 17th November.  The central bank will also release forecasts for growth which are expected to be downwardly revised again. Goldman Sachs sees the UK economy contracting -1.4% next year. 

Where might the EUR/GBP price head to?

EUR/GBP failed at resistance 0.8750 the 20 sma and rebounded lower, breaking below the 50 sma before finding support at 0.8570. The RSI below 50 and the 20 sma crossing below the 50 sma could keep sellers hopeful of further downside. Sellers need to break below 0.8570 to extend the bearish trend towards 0.8510, the August 14th high, and 0.8450, the rising trendline support. On the flip side, should buyers rise over 0.87 at the 50 sma and 0.8790 the mid-October high, buyers could look to target 08870 the October 12 high.

PayPal Q3 earnings preview

Both Visa and Mastercard reported a rise in payments when they posted results at the end of last month, thanks to a recovery in travel and cross-border transactions. Meanwhile, consumer spending has also remained resilient even as interest rates rise. Spending volumes continue to grow at a slower pace, which means slowdown worries linger. This bodes well for PayPay, whose share price has fallen over 50% so far this year, underperforming the broader market. Expectations are for revenue growth of 10% in Q3 to $6.8 billion, and EPS is expected to fall 14% to $0.96. PayPal aims to add 10 million new active users this year.

BTC/USD steadies after Fed-inspired volatility

BTC/USD experienced high levels of volatility after the Federal Reserve interest rate decision and Federal Reserve Chair Jerome Powell’s speech. In line with expectations, the US central bank hiked rates by 75 basis points, taking the benchmark rate to 4%. This was the fourth consecutive hike of this size. While the policy statement was dovish leaning, Fed Chair Powell caught the market off guard with his speech, saying that interest rates could rise further than initially expected. He added that there could be some smaller hikes along the way, but it was far too early to discuss any dovish pivot. US equities fell sharply on the news; the Nasdaq closed over 3% lower. BTC/USD BTC/USD shot up to 20,800 before falling to 20k and is now trading at approximately the same level as before the meeting.

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