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The Bank of England (BoE) kept rates unchanged at 3.75%, but unlike a passive pause, this was framed as a deliberate and active policy choice.
The decision itself was widely expected, but the 8–1 vote split, with one member pushing for a rate hike (Huw Pill), immediately signalled a more hawkish tilt beneath the surface. Policymakers are clearly becoming more concerned about the inflation outlook, particularly as higher energy prices begin to feed through the economy.
Governor Andrew Bailey made it clear that the current environment presents a difficult trade-off. Indeed, monetary policy cannot prevent the initial impact of higher global energy prices, but it must ensure that these shocks do not become embedded in wages and broader price-setting behaviour.
Furthermore, that risk of second-round effects was at the heart of the message. While still uncertain, Bailey stressed that waiting for definitive evidence would be a mistake, effectively signalling that the central bank is prepared to act pre-emptively if needed.
At the same time, the BoE is not rushing into further tightening. Instead, it is using its current stance, and crucially, the decision not to cut rates as previously expected, as a way to lean against inflation pressures. In that sense, policy is already doing more work than the headline decision might suggest.
The outlook, however, remains highly dependent on energy prices, particularly in light of the ongoing crisis in the Middle East. The longer the current shock persists, the greater the risk to both inflation and growth, leaving policymakers navigating a narrow and uncertain path.
All in all
This was not a dovish pause. The BoE is actively holding its ground, pushing back against rate cut expectations and keeping the option of further tightening alive if inflation pressures broaden.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
- EUR/GBP retreats as both central banks hold rates unchanged as expected.
- ECB hike discussions and sticky inflation keep Eurozone tightening risks alive.
- BoE split vote supports Sterling, despite Bailey pushing back on markets.
The EUR/GBP pair falls some 0.16% on Thursday as the central bank bonanza ends with the European Central Bank (ECB) and the Bank of England (BoE) keeping interest rates unchanged as expected. The cross-pair trades at around 0.8644 after reaching a daily high of 0.8670.
Sterling edges up as BoE split offsets ECB's hawkish rate signals
The European Central Bank kept the Deposit Rate at 2%, even though the Harmonized Index of Consumer Prices (HICP) in April rose from 2.6% to 3%, Eurostat reported. ECB President Christine Lagarde said the decision to hold rates was unanimous, but there were discussions “at length” to raise rates amid rising energy prices due to Iran’s war.
She hinted that the ECB will assess the economic situation and warned that a stagflationary scenario lurks. Meanwhile, money markets are pricing in nearly three 25 basis points rate hikes by the Lagarde and Co. for the rest of the year.
The Eurozone economy grew modestly in Q1, rising 0.1% QoQ, below estimates for a 0.2% expansion.
In the UK, the Bank of England followed suit, keeping rates steady at 3.75% as expected, on an 8-1 vote split, with the Chief Economist, Huw Pill, voting for a rate hike.
BoE Governor Andrew Bailey commented that the central bank faces a “difficult judgment call” on whether to adjust rates proactively or wait for evidence of a sustained rise in inflation. However, he pushed back against the swaps market, which was pricing in two rate hikes.
At the beginning of April, Bailey pushed back against investors who were pricing in further BoE tightening. The BoE’s meeting minutes revealed that some policymakers “might prefer to act early” before inflation becomes persistent.
Up next, the Eurozone docket is absent, while in the UK, traders will eye BoE’s Chief Economist Huw Pill’s speech.
EUR/GBP Price Forecast: Technical outlook
In the daily chart, EUR/GBP trades at 0.8637, extending a bearish bias as spot remains capped beneath the cluster of simple moving averages around 0.8686 and below the descending trend-line break level at 0.8704. The latest 14-day Relative Strength Index at 34.7 hovers just above oversold territory, hinting that while bearish momentum persists, downside pressure may be losing some intensity.
On the topside, initial resistance is located at the triple simple moving average area near 0.8686, with a further barrier at the former trend-line break level around 0.8704, which should act as a notable cap while the pair trades below it. A daily close above these successive hurdles would be needed to ease the current downward pressure and open the way for a more sustained recovery phase.
(The technical analysis of this story was written with the help of an AI tool.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- The Australian Dollar gains traction after China's PMI data signaled that the economy remained resilient in April.
- US Initial Jobless Claims reached their lowest point in almost 60 years at around 189K.
- The RBA will meet on May 5, with expectations of a potential third rate hike.
The AUD/USD recovers toward the 0.7190 price region on Thursday, erasing Wednesday's losses, as the Australian Dollar (AUD) benefits from data showing a resilient Chinese economy and a weaker US Dollar (USD).
The April Chinese NBS Manufacturing Purchasing Managers Index (PMI) rose to 50.3, higher than the expected 50.1, while the RatingDog manufacturing PMI also beat forecasts. The NBS non-Manufacturing PMI came below expectations, at 49.4, down from the forecasted 49.9. This better-than-expected data boosts the Aussie as China is one of Australia’s top trading partners.
In the United States (US), Initial Jobless Claims dropped to 189K, the lowest in almost 60 years, contrary to expectations of remaining stable at around 215K. Additionally, the PCE Price Index, the Fed’s preferred inflation measure, rose to 3.5% year over year in March from 2.8% in February, aligning with market forecasts.
Despite these positive job figures, preliminary Q1 GDP growth came in at 2%, below the expected 2.3%, which tempered investor enthusiasm over the USD.
The Reserve Bank of Australia (RBA) will have its next meeting on May 5. Investors expect the RBA to potentially hike interest rates for a third consecutive time amid persistently high inflation.
Short-term technical analysis:
On the four-hour chart, AUD/USD trades at 0.7183, holding a modest bullish bias as it stays above the 20-period and 100-period Simple Moving Averages (SMAs) at 0.7163 and 0.7134, respectively. The Relative Strength Index (RSI) hovers near 59, hinting at firm but not overstretched buying pressure as the pair edges toward nearby overhead barriers.
On the topside, immediate resistance appears at 0.7184, followed by a more significant cap near 0.7192, where prior supply is likely to re-emerge. On the downside, initial support is seen at 0.7167, backed by the short-term 20-period SMA around 0.7163, while deeper demand aligns at 0.7145 and the broader trend floor from the 100-period SMA near 0.7134.
(The technical analysis of this story was written with the help of an AI tool.)
- Silver rebounds above $73 after a recent correction phase.
- Higher-for-longer rate expectations continue to weigh on non-yielding metals.
- OCBC analysts highlight weakening momentum after the failed break above $80.
Silver (XAG/USD) moves higher on Thursday, trading around $73.40 at the time of writing, up 2.81% on the day, after undergoing a marked pullback in recent weeks. This technical rebound comes as the white metal attempts to stabilize following the rejection near the $80 threshold in mid-April.
The move remains fragile, however, amid an unfavorable macroeconomic environment. Persistently high Oil prices, driven by geopolitical tensions in the Middle East, are sustaining inflation concerns. This dynamic is reinforcing expectations that central banks will maintain restrictive monetary policies for longer, reducing the appeal of non-yielding assets such as Silver.
The Federal Reserve (Fed) confirmed this cautious stance by keeping interest rates unchanged on Wednesday, while emphasizing uncertainty surrounding the inflation outlook, particularly due to elevated energy costs. This position is strengthening expectations that financial conditions will remain tight for an extended period, or even tighten further if inflationary pressures persist.
In this context, analysts at OCBC note that Silver’s bullish momentum has clearly weakened after the rejection below $80. According to the analysts, the recent correction reflects both profit-taking and a less supportive macro backdrop, marked by rising rate expectations and a firmer US Dollar.
In addition, Silver’s dual nature as both a safe-haven asset and an industrial metal adds another layer of volatility. Uncertainty surrounding global growth and industrial demand, particularly in the photovoltaic sector, is limiting investors’ appetite for aggressive long positions.
Despite Thursday's rebound, the balance of risks remains tilted to the downside in the medium term, as long as monetary conditions stay restrictive and inflationary pressures persist.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- Gold rebounds as the US Dollar weakens after Tokyo FX intervention warnings.
- Higher-for-longer rate expectations continue to cap the upside for the non-yielding metal.
- Technically, XAU/USD remains capped below a dense cluster of key moving averages on the 4-hour chart.
Gold (XAU/USD) edges higher on Thursday, recovering from the one-month low of $4,510 seen the previous day. The modest rebound comes as the US Dollar (USD) weakens after Tokyo ramps up FX intervention warnings. At the time of writing, XAU/USD trades around $4,620, up about 1.67% on the day, though it remains on track for a second consecutive monthly decline.
The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 98.28, down about 0.68%. The bullion is benefiting more from USD weakness than underlying fundamentals, as macro headwinds persist amid ongoing tensions in the Middle East.
US President Donald Trump said the United States will continue its naval blockade of Iran until a nuclear deal is reached with Tehran. Trump is also reportedly considering a new plan to reopen the Strait of Hormuz, working with allies to protect energy flows while keeping pressure on Iranian ports.
Uncertainty over a near-term resolution to the US-Iran war and the reopening of the Strait of Hormuz keep Oil prices elevated, fueling inflation concerns and raising expectations that central banks may keep interest rates higher for longer, or even tighten policy further if inflation pressure intensifies.
A higher interest rate environment is typically negative for non-yielding assets like Gold, meaning the upside remains limited despite the intraday rebound. This view is further supported by the latest monetary policy decision from the Federal Reserve (Fed), announced on Wednesday.
The Fed left its benchmark rate unchanged in the 3.50%-3.75% range, in line with expectations. However, the decision highlighted a split within the committee, with an 8-4 vote that marked the highest number of dissents since 1992. Governor Stephen Miran supported a 25 basis point rate cut, while three regional Fed Presidents — Beth Hammack, Neel Kashkari and Lorie Logan — pushed back against the inclusion of any easing bias in the statement.
During the press conference, Fed Chair Jerome Powell said developments in the Middle East are adding to uncertainty around the economic outlook. He noted that elevated energy costs are likely to push inflation higher in the near term, while emphasizing that the current policy stance is “well positioned” to take a wait-and-see approach.
Markets are now increasingly expecting the central bank to keep rates on hold through 2026, while the chance of a rate hike by April 2027 has jumped to 23.8% from just 0.8% a week earlier, according to the CME Group FedWatch Tool.
Powell’s term as Chair ends on May 15. Former Fed Governor Kevin Warsh, nominated by US President Donald Trump, is now awaiting a full Senate vote after his nomination was advanced by the Senate Banking Committee on Wednesday.
On the data front, the US economy expanded at an annualized rate of 2.0% in the first quarter of 2026, up from 0.5% in the previous quarter but below market expectations of 2.3%, according to a preliminary estimate. The PCE price index rose 0.7% on month in March, accelerating from 0.4% in February and marking the strongest gain since June 2022. Meanwhile, the core PCE index, the Fed’s preferred gauge, increased by 0.3% MoM, easing slightly from 0.4% in February and coming in line with forecasts.
Technical Analysis: XAU/USD faces strong overhead supply near key SMAs
In the 4-hour chart, XAU/USD maintains a bearish near-term bias as price holds beneath a dense cluster of moving averages. The Relative Strength Index has edged above the 50 line to about 52, which hints at a modest improvement in momentum but not yet enough to dislodge the prevailing overhead supply from these key averages.
On the topside, immediate resistance is defined first by the 50-period SMA at $4,684, closely followed by the 200-period SMA at $4,685, with the 100-period SMA near $4,731 reinforcing a broader supply zone if a recovery extends. On the downside, the next notable cushion emerges at the horizontal support around $4,500, where a break would likely reopen the last leg lower, while holding above this floor would keep scope for further consolidation beneath the moving-average ceiling.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Sources speaking with Reuters revealed that the European Central Bank (ECB) policymakers are likely to hike rates “at least” twice this year, beginning in June if there’s no resolution to the Iran conflict.
The ECB kept rates unchanged at its April meeting, while signaling that discussions are underway to tighten policy to contain surging energy prices.
Sources speaking anonymously said, “They expected a first rate increase in June if the situation continued as it was, with traffic disrupted and spot Brent prices above $100 a barrel.”
During her press conference, Lagarde said there were lengthy discussions about a rate hike, but a source familiar with the matter said policymakers are eyeing a move in June, not April.
Another source revealed that rate increases are contingent on the outcome of the US-Iran conflict, and a possible de-escalation could trigger a fall in oil prices, which could improve the Eurozone’s economic outlook.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
ING’s Global Head of Macro, Carsten Brzeski, notes that the European Central Bank (ECB) kept interest rates on hold as stagflationary pressures in the Eurozone rise. The bank highlights weaker Gross Domestic Product (GDP) growth, mixed inflation dynamics and tighter credit conditions. ING recalls ECB policy errors in 2011 and suggests policymakers are reluctant to hike into an exogenous supply shock.
ECB cautious as stagflation risks rise
"As stagflationary pressures in the eurozone increase, the ECB has decided to keep interest rates on hold. In its policy statement, the ECB acknowledged rising inflationary pressures but also more downward risks to growth."
"The policy statement didn't give any hint at the next steps. It looks as if the ECB is in no rush to hike."
"The latest data releases in the eurozone have clearly complicated the ECB’s life. Slightly weaker-than-expected GDP growth in the first quarter, increasing headline inflation but dropping core inflation in Germany and a Bank Lending Survey pointing to tighter credit standards and weaker loan demand all suggest that stagflationary pressures are increasing."
"Back in 2011, the ECB hiked interest rates – admittedly from slightly lower levels than currently – to tackle rising inflationary pressures. Only to find out that these rate hikes pushed the eurozone economy further into stagnation."
"Looking ahead, even though the ECB’s primary policy goal is price stability, it’s hard to see that it would really want to fight an exogenous supply shock at the cost of worsening an economic downturn."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
ABN AMRO’s US Senior Economist Rogier Quaedvlieg reviews the latest Federal Open Market Committee (FOMC) decision, noting that the Federal Reserve (Fed) kept rates unchanged and maintained an easing bias in its statement. He highlights deep divisions within the committee, but concludes that the Fed is likely to hold the federal funds rate steady through 2026, before gradual cuts take it toward a 2.75-3.00% neutral range.
Fed holds rates and keeps easing bias
"The Fed left rates unchanged as expected. The major headline was that four FOMC members dissented, a number not seen since the early 1990s."
"The statement remained unchanged, but it seems that the three dissenters were looking for more explicit two-sided description of the future interest rate decisions. Powell also confirmed there were non-voters that preferred the language change. Still, the majority decided to keep the language intact, meaning the easing bias is still present in the statement."
"The Fed's resolve to keep rates at their current level seems to have only strengthened. The centre of the committee is moving towards a more neutral place, but they are firmly in wait-and-see mode."
"We see no reason to adjust our Fed call on the basis of this meeting, and still see the Fed holding rates steady until the end of the year, where some disinflation and weakness in the labour market will provide a reason to moderately ease, starting with 25bps in December, and another 25bps per quarter, arriving at a 2.75-3.00% bandwidth, the lower end of neutral, by June."
"He [Powell] noted that things could look very different by the June meeting."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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