Morning Kickstart: BOE hikes to 4% as sterling struggles to hold its gains

In the morning video above, I take a look at the three major currency pairs—EURUSD, USDJPY and GBPUSD—from a technical perspective. For each pair, I outline the bias, the risk-defining levels and the targets that would give either the buyers or sellers more control.The Bank of England raised Bank Rate by 25 basis points to 4.00% as expected. All nine policymakers favored a hike, versus seven expected, but the formal vote on the quarter-point move was 8–1. Catherine Mann wanted a larger, 50-basis-point increase to 4.25%. GBPUSD traded as high as 1.3506 during the session and is now back at 1.3467, little changed on the day. Bank of England decision and minutesBank of England Governor Andrew Bailey said today’s quarter-point hike to 4% was justified by inflation pressures already in the pipeline, even after the latest drop in oil prices. He said the hike does not necessarily mark the start of a series, but the case for another 25 basis points could be fairly strong if the US–Iran conflict remains unresolved. Further progress toward a resolution could reduce the need for additional hikes and allow inflation to peak somewhat below 5%. Bailey said the UK economy has been more resilient than expected, though the strength has been concentrated, with AI investment accounting for about a fifth of GDP growth. Private-sector wage growth is expected to change little in the coming months, while food and core goods inflation are likely to pick up. How long the conflict lasts and how energy costs feed through to broader inflation will help determine the BOE’s next move.UK inflation rose to 3.5% in September, and the BOE expects it to approach 5% by mid-2027 as higher energy prices feed into household and business bills. Stronger-than-expected activity helped make the case for today’s hike. For the next decision, I’ll be watching whether those higher costs start showing up in wages and a wider range of prices. The BOE still sees limited evidence of that spillover. This morning’s UK construction PMI, meanwhile, fell to 43.6 from 46.1, below the 46.4 forecast.The dollar is mixed and the moves are smallThe dollar’s biggest gain is against the Swiss franc, with USDCHF up 0.10%. It is down the most against the Canadian dollar and euro, both by about 0.06%. The dollar is also modestly lower against the New Zealand dollar and yen, and slightly higher against the pound and Australian dollar. With changes this small, I’m watching the edges of the session ranges for a better read on who is taking control.SNB Chairman Martin Schlegel reiterated that the policy rate remains the central bank’s main tool, with foreign exchange intervention available when needed. He noted that Switzerland is highly exposed to external economic shocks and that the Swiss franc has relatively strong safe-haven characteristics compared with other currencies. Schlegel said the SNB’s monetary policy strategy works across a broad range of conditions and that the central bank has fulfilled its mandate of maintaining price stability over the medium term.How much of a normal day’s range has traded?The ranges below use the session highs and lows and the 22-day average ranges.EURUSD — 1.1217 to 1.1268, 51 pips or 80% of average.USDJPY — 157.79 to 158.44, 65 pips or 93% of average.GBPUSD — 1.3449 to 1.3506, 57 pips or 81% of average.USDCHF — 0.8136 to 0.8185, 49 pips or 92% of average.USDCAD — 1.3943 to 1.3983, 40 pips or 63% of average.AUDUSD — 0.7002 to 0.7024, 22 pips or 50% of average.NZDUSD — 0.5617 to 0.5657, 40 pips or 91% of average.AUDUSD has the most room relative to its recent average, followed by USDCAD. USDJPY, USDCHF and NZDUSD have already covered more than 90% of theirs. I use those averages for context. A break that holds beyond a session high or low can still extend the range.U.S. futures are mixed as chip stocks lagNasdaq 100 futures are lagging as chip and data-center shares come under pressure. Qualcomm was down about 10% in early premarket trading after smartphone-chip sales fell short of estimates. The S&P 500 is little changed in futures after Wednesday’s post-election rally. The Dow is higher as the market traders rotate out of tech.  Dow futures +308 pointsS&P 500 futures +9.5 pointsNasdaq 100 futures −260 pointsEuropean shares are higher across the major indices:German DAX +0.47%French CAC 40 +0.79%UK FTSE 100 +0.62%Spanish IBEX 35 +1.38%Italian FTSE MIB +0.22%Short-term Treasury yields rise. Oil and gold are higher.The 2-year yield is up nearly 3 basis points while the 10-year is effectively flat. I’ll be watching the front end for the initial reaction to claims and unit labor costs.2-year yield at 4.608%, up 2.69 basis points5-year yield at 4.700%, up 1.20 basis points10-year yield at 4.892%, up 0.01 basis point30-year yield at 5.271%, down 0.91 basis pointU.S. crude is up $1.41, or 1.60%, at $89.53, near the session high of $89.84 after trading as low as $86.65. Spot gold is up $64.11, or 1.58%, at $4,124.47. The price extended above the topside trend line near $4083 without much in the way of resistance, rising to a high of $4146. That was near swing highs from October 19-October 21 before the resumption of the move down (see chart below). Silver is up 0.63% at $52.58, copper is down 0.47% at $6.3990, and Bitcoin is down and back below $80K. The price snapshot is down -0.68% at $79,883.What’s ahead in North AmericaChallenger job cuts were down 71.3% year over year, following a 19.9% decline in the prior report. Weekly claims are next, ahead of Friday’s jobs report. Productivity and unit labor costs also come out at 8:30 AM ET. If productivity picks up and unit labor costs slow as expected, it would point to less labor-cost pressure per unit of output. InvestingLive’s week-ahead preview8:30 AM ET – U.S. initial jobless claims – Forecast 197K – Previous 194K8:30 AM ET – U.S. preliminary nonfarm productivity, q/q – Forecast 2.8% – Previous 1.4%8:30 AM ET – U.S. preliminary unit labor costs, q/q – Forecast 0.3% – Previous 1.2%8:50 AM ET – Cleveland Fed President Beth Hammack speaks9:10 AM ET – Richmond Fed President Thomas Barkin speaks10:30 AM ET – Bank of Canada Governor Tiff Macklem speaks12:45 PM ET – Bundesbank President Joachim Nagel speaks1:00 PM ET – ECB President Christine Lagarde speaks4:00 PM ET – Canada’s annual budget release This article was written by Greg Michalowski at investinglive.com.