Forex News

OCBC strategists Sim Moh Siong and Christopher Wong note that Gold has rebounded following the US midterm elections, supported by a weaker US Dollar (USD), lower Treasury yields and softer Oil prices, reclaiming the $4,000 level. The metal is responding more positively to a favourable macro backdrop, prompting cautious optimism that it may be finding its footing. However, sustained gains would likely require easing Fed tightening expectations and a continued recovery in investment demand.

Metal finds footing with softer Dollar

"Precious metals rebounded sharply following the US midterm elections, supported by a softer USD, lower US Treasury yields and oil prices as markets reassessed the implications of political gridlock for US fiscal policy and growth."

"Gold rallied around 3%, reclaiming the 4000 level. Expectations that political gridlock may constrain fiscal expansion and weigh on US growth provided some relief to yields, while slippage in oil prices also lent support."

"Encouragingly, gold has started to respond more positively to a favourable macro backdrop, following its earlier reluctance to benefit from lower yields and USD weakness."

"We are cautiously optimistic that gold may be finding its footing, although further gains would likely require some moderation in Fed tightening expectations and continued recovery in investment demand."

"Mild bearish momentum on daily chart faded while RSI rose. Some upside risks not ruled out."

"We continue to monitor real yields, USD direction, oil prices and ETF flows for signs of sustained buying interest. Friday’s US payrolls will be another important test."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• GBP/USD bounces up to 1.3480 from session lows near 1.3450 as the BoE hikes interest rates for the first time in three years.
• The BoE raised its bank rate by 25 basis points to 4% in a unanimous vote.
• Some policymakers have assessed that one interest rate hike will not be enough.

The British Pound (GBP) has bounced from session lows against the US Dollar (USD) on Thursday, as the Bank of England hiked interest rates, as widely expected, with some policymakers calling for further monetary tightening. The GBP/USD pair holds minor daily gains at 1.3480, after having rallied about 1.3% over the last seven days.

The Bank of England’s monetary policy committee voted unanimously to raise its benchmark interest rates by 25 basis points to 4%, as widely expected. The central bank has also revised the projections of Gross Domestic Product (GDP) growth for the year 2027 up to 1.3%, from the previous 1.1%, and some members signalled further rate hikes to follow.

The focus is now on Governor Andrew Bailey’s press release, which will start in a few minutes, and is likely to give further insight into the BoE’s near-term monetary policy plans.

The British Pound had been trading higher against most peers over the last few days, as a string of upbeat UK macroeconomic data paved the path for the central bank to raise interest rates for the first time since August 2023.

Looking ahead, analysts at MUFG Bank see the market as more hawkish than the BoE: “We expect the BoE to signal that further tightening is likely to be required but not as much as currently priced in. The UK rate market had been pricing in 4-5 hikes, although that has been scaled back as the price of oil has dropped sharply this week." With this in mind, it seems likely that a more cautious Bailey might disappoint investors and trigger some Pound reversal.

Nomura strategists note that Norges Bank kept its policy rate at 4.50% in November and signalled a willingness to hike again if needed. They expect no further rate changes in 2026–2027 and see the next move as a cut, likely only from 2028, given very gradual disinflation in Norway.

Norges Bank seen on extended hold

"Norges Bank left its policy rate unchanged at 4.50% at its November meeting, as we and consensus expected."

"The Governor’s guidance was that “it will likely be necessary to keep the policy rate elevated for a time, and we are prepared to raise the policy rate if needed to bring inflation down to target within a reasonable time horizon”. This is in line with what we expected and similar to the guidance from September."

"In the minutes accompanying today’s announcement, policymakers highlighted concerns that inflation has remained above target for several years and that the rapid rise in business costs in recent years will likely contribute to keeping inflation elevated ahead."

"Therefore, even if underlying inflation falls towards 2%, we think the bar to the first Norges Bank rate cut is quite high, as policymakers will want to see evidence of a sustained slowdown in price growth."

"In our central forecast, we believe that the next move from Norges Bank is likely to be a cut. However, this is unlikely to occur until 2028 at the earliest, as we forecast the disinflation process in Norway to be very gradual."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)