Russell Shor

The BoE hiked its official bank rate by 50bps to 2.25%. Three of the nine MPC members voted for 75bps, with one member preferring a 25bps move. Furthermore, the central bank expects an 11% inflation rate in October, reduced from 13%. However, the bank statement maintained, "should the outlook suggest more persistent inflationary pressures, including from stronger demand, the Committee will respond forcefully."

Japanese authorities have intervened and defended the yen, stopping a potential capitulation by USDJPY to 150. As a result, selling into the market began near the 145.75 level, pushing the price down to 140.64. This action comes after BoJ's Kuroda reiterated to continue monetary easing, initially sparking a selloff in the yen. Given this, it will be unsurprising if the Japanese Finance Ministry regularly influence price levels over the medium…

The currency pair weakened following an announcement by Russian President Putin of a partial mobilisation of troops, calling on 300,000 reservists. Recently, Russia has lost ground to the Ukrainian forces.

The NAS100 is sensitive to interest rate movements due to the time value of money. As such, tomorrow's Fed hike is creating headwinds.

Gold has been under pressure since real rates turned positive in late April. The market expects an aggressive Fed tomorrow, weighing on the precious metal.

Last week's CPI numbers showed resilient inflation. This surprised markets and introduced 100bps as an option for the Fed. Join FXCM Market Specialists Russ and Nik as they discuss this, the new terminal rate, and the chances of the Fed overshooting. The two specialists also examine the yield inversion and discuss the BoJ's monetary policy. Please join us for these and more.

The current inflation tends to have a broad sticky element to it. This price resilience will likely concern the Fed until it shows moderation. However, per the preliminary University of Michigan Inflation Expectations survey, consumer expectations moderated to 4.6% (4.8% - previous). Moreover, the pricing elements from last week's Empire State and Philly Fed Manufacturing Indexes indicate moderation. Therefore, 75bps seems to make more sense at this stage.

The US 02-yr Treasury note jumped today, trading at levels last seen in November 2007. It's trading near 3.85%, reflecting market expectations of at least a 75bps hike next week. Some participants have discussed a 100bps increase, reflecting as a 26% probability presently.

Given the need to control inflation, the prospect of higher interest rates is a headwind for gold. As such, in our view, the probability of lower prices is the path of least resistance.

The CPI surprise yesterday led to a 3.9% decline in the US30. This plunge puts the index back in its bear zone between the lower blue and red bands. Moreover, the daily stochastic is rolling over (green rectangle). If it drops below 20 and holds (red arrow), a strong bearish momentum will be underlying.

The US interest rate is a crucial driver of financial markets in the current environment. This dynamic is despite the communication out of the ECB. I.e., the chart above shows the US real rate and its correlation coefficient (cc) with the EURUSD. The cc is at -58% and has been robust since the real rate turned positive at the end of April (green dashed line). Therefore, the current upswing in…