The Bank of England's monetary policy meeting yesterday surprised the markets with hawkish tone. Officials voted to leave the interest rates unchanged at 0.50% at yesterday's meeting by a unanimous vote. However, the statement showed that the central bank expects faster pace of rate hikes given the uptick in the global growth.
Despite the hawkish tone from the BoE, the fact that the central bank acknowledged that the UK wasn't fully able to take advantage of the growth phase and the uncertainty from Brexit remained some key factors that offset the hawkish tone.
The equity markets resumed the selloff with the Dow Jones falling over 1000 points on the day on Thursday. Major U.S. stock indexes were down by at least 3%. The selloff extended to the Asian session with the Nikkei index down 2.7% while the Shanghai Composite was seen losing 4.11% at the time of writing.
Earlier today, China's inflation data confirmed that consumer prices rose at a slower pace of 1.5% as expected. This is a weaker print compared to December’s inflation rate of 1.8%. Producer prices were also weaker, rising just 4.3% missing estimates and slower than December’s increase of 4.9%.
Looking ahead, the economic calendar will see Canada's unemployment details. Unemployment rate is expected to edge slightly higher to 5.8% while the economy is forecast to add 10.3k jobs during January.
EUR/USD intra-day analysis
EUR/USD (1.2254): The EUR/USD extended declines as prices touched a fresh monthly low at 1.2211 before pulling back slightly. The daily session in the EUR/USD ended with a spinning bottom candlestick pattern that could suggest a near term recovery in the declines. On the 4-hour time frame, EUR/USD is seen consolidating near 1.2237 retesting the January 23 lows.
We expect to see a pullback in prices that could see EUR/USD retesting the broken support level at 1.2363 - 1.2333. If resistance is established here, then EUR/USD could extend declines down to 1.2090 - 1.2070 level in the medium term. The bias shifts if price manages to breakout above 1.2363, resistance high.
GBP/USD intra-day analysis
GBP/USD (1.3934): The British pound was seen to be volatile yesterday on the back of the Bank of England monetary policy meeting. As noted in yesterday's commentary, GBP/USD initially rallied to 1.4037 but with the resistance holding up, price action promptly reversed gains.
We expect GBP/USD to maintain a sideways range within 1.4037 and 1.3855. A breakout from this range will establish further direction in the currency pair. The bias is to the downside and we expect GBP/USD to eventually breakout below 1.3855 to fall towards 1.3611 - 1.3589 level of support.
NZD/USD intra-day analysis
NZD/USD (0.7211): The New Zealand dollar continues to extend the declines with the RBNZ's dovish statement earlier this week. The reversal off the 0.7333 support turned resistance indicates a decline to the initial support at 0.7160.
NZD/USD could be seen rebounding off this level. If the support holds, we anticipate a potential inverse head and shoulders pattern being formed, visible on the daily time frame. With the neckline resistance seen at 0.7333 - 0.7350, NZD/USD could be potentially consolidating for a stronger breakout to the upside. The bias is invalidated on a break down below the 0.7160 support.