GBP/USD => The pound falls to 1.1250
DAX => The index drops to 12500
BTC/USD => The cryptocurrency falls to 18400
GBP falls to 37-year low ahead of BoE
GBP/USD tumbled 1% yesterday to a fresh 37-year low after the Fed hiked rates and as investors digested government borrowing data ahead of Friday’s mini-budget. The British government borrowed almost twice what was expected, which paints a challenging backdrop ahead of the tax cuts and support packages set to be announced by Chancellor Kwasi Kwarteng on Friday. Today the pair is falling below 1.1250 ahead of the BoE rate announcement, where the central bank is expected to raise rates by 50 or 75 basis points. Given the recent energy support package by Liz Truss, the BoE could be brave and go big. A 50-basis point hike may underwhelm the market and send GBP lower.
Where next for GBP/USD?
GBP/USD has broken below its falling trendline support reaching a low of 1.1220. The RSI has tipped into oversold territory, so some consolidation or even a rise could be on the cards before further selling. Sellers will look to break below the 1.12 round number to head towards 1.1150. Buyers will look towards 1.1350, last week’s low, ahead of 1.14, the September 7 low.
DAX set to drop 2% on the open
The DAX booked a positive close yesterday but is set to fall steeply on the open today. The market mood has soured significantly after the Fed hiked rates and hammered home a hawkish message and as investors continue digesting Putin’s escalation of the war in Ukraine. Putin ordered the mobilization of some 300,000 troops, the first mobilization since World War II, as he also looked to referendums in annexed states and made thinly veiled nuclear threats. Amid the combination of a more hawkish Fed and no end to the war in sight, the Dax is out of favour.
BTC/USD drops post-Fed decision
Cryptocurrencies, such as Bitcoin, experienced volatile trading surrounding the Fed’s expected 75 basis point rate hike, the third such hike, initially rising before tanking lower. BTC/USD trades around 2% lower at the time of writing at 18,400, a three-month low. The bears were out for ETH/USD, which dropped over 5.5% to around 1250 as investors continued to dump Ether post Merge.
The Fed not only hiked rates but pressed ahead with the hawkish message that the central bank will keep hiking rates until inflation, which sits at 8.3%, comes back towards the Fed’s 2% target. Higher interest rates slow growth and removes liquidity from the system. Recent price moves have highlighted that the Fed is, by far and away, the biggest driver of cryptocurrency movements at the moment.
Support can be found at 18,300 (weekly low) and 17600 (2022 low).
Resistance for the pair can be seen at 20k (round number) and 21500 (50 sma).