The 00% tariff is shocking and the market is not shaken! Will the Bank of England cut interest rates?

On Thursday, the market was cautious in evaluating the latest news about the U.S. trade regime, while awaiting the Bank of England’s (BoE) monetary policy announcement. Later that day, the U.S. Economic Calendar will release weekly initial jobless claims figures and second-quarter unit labor costs.

The US dollar (USD) faces bearish pressure on Wednesday after U.S. President Donald Trump released news about tariffs. Trump issued an executive order to impose a 25% tariff on Indian imports and said he could impose a 25% tariff on Chinese goods on purchases of Russian oil. In addition, he said he would impose 100% tariffs on semiconductors and chips, but would not impose tariffs on vifu.netpanies made in the United States and threaten to impose an additional 15% tariff on all Japanese imported products. The U.S. dollar index turned down after a slight gain on Monday and Tuesday, down more than 0.5% on Wednesday. The index remained relatively calm, with fluctuating above 98.00 in early trading on Thursday.

The Bank of England is generally expected to lower its policy interest rate by 25 basis points (bps) to 4% after its August meeting. After announcing the interest rate decision, Bank of England Governor Andrew Bailey will issue a policy statement and answer questions at a press conference starting at 11:30 GMT. The GBP/USD is still in the consolidation phase above 1.3350 after rising more than 0.4% on Wednesday.

Basic foreign exchange market conditions:

The market expects the Federal Reserve to further easing, coupled with weak macro data (especially last Friday's non-farm employment report) and Trump's push to nominate more dovish Fed directors and chair candidates, the dollar continued to weaken against major currencies on Thursday. The US dollar index rebounded slightlyIt fell to 98.133, continuing the 0.6% drop on Wednesday.

The euro rose 0.1% against the US dollar to 1.1672, a sharp rise of 0.7% in the previous trading day. The prospect of a plan to meet with Russian President Putin on the Ukrainian war has also strengthened market confidence and boosted the euro.

The pound rose 0.2% to $1.3371. The pound remained strong before the Bank of England was about to announce its policy resolution, hovering at a weekly high. The market generally expects to cut interest rates by 25 basis points, and the focus is on the possible "tripartite differences" of the Monetary Policy vifu.netmittee: the two advocates remain unchanged, and the two advocates a significant reduction in interest rates.

The Bank of England is expected to cut interest rates for the fifth time in 12 months later that day, but continued concerns about inflation may severely divide decision-makers and make future monetary policy uncertain. It is reported that two members of the Monetary Policy vifu.netmittee (MPC) may advocate a 50 basis point cut, while the other two may advocate keeping interest rates unchanged.

Bulle market fundamentals:

After gold soared to $3,370 during the Asian trading period, it was difficult to find direction and extended sideways above $3,400.

Analysis of major currency trends:

Euro: The intraday bias of the euro/dollar is still on the upward trend. The correction from 1.1829 should have been vifu.netpleted, with three waves falling to 1.1390. Further rebound will retest the 1.1788/1820 resistance zone. However, on the downside, breaking through the 1.1526 small support level will weaken this view and retest 1.1390.

GBP: GBP/USD broke through the 1.3363 support and turned into resistance, indicating that the correction from 1.3787 has been vifu.netpleted, and the three waves fell to 1.3140. Intraday, it was upward again to the 1.3587 resistance level. A firm breakthrough will aim at the high point of 1.3787. However, on the downside, falling below 1.3258 will further fall to the 38.2% retracement level 1.2099 to 1.3787, at 1.3142.

Yen: The intraday bias of the US dollar/yen is currently neutral. As long as the support level of 145.84 is held, a larger rebound of 139.87 is still conducive to continuing. On the upside, a small resistance above 148.07 will bring a stronger rebound, and retest 150.90. On the downside, however, is that a firm breakout of 145.84 support will indicate that the full rise from 139.87 may have been vifu.netpleted. It should then fall further to 142.66 support level to confirm.

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