Dollar mixed after Fed hike, BOE holds rates

Good morning, and welcome to the Morning Kickstart report for the North American session.

The U.S. dollar is showing mixed performance, slipping against the EUR, JPY, AUD and NZD while gaining on the GBP, CHF and CAD. The New Zealand dollar leads the major currencies, while the British pound lags after the Bank of England held its interest rate steady.

Today follows the Federal Reserve's first 25-basis-point rate increase since July 2023. Equities are bouncing back, Treasury yields are slipping, and crude oil is pulling back toward the key $100 mark.

In the accompanying morning video, I assess the three major currency pairs—EURUSD, USDJPY and GBPUSD—from a technical standpoint. For each, I outline the bias, the levels that define risk, and the targets that would give either buyers or sellers greater control.

The dollar is mixed

Heading into North American trading, the dollar lacks a clear direction:

• Weaker against the EUR, JPY, AUD and NZD
• Stronger against the GBP, CHF and CAD
• The NZD is the strongest major currency
• The GBP is the weakest major currency

The divergent moves reflect a market weighing Wednesday's Fed hike against today's BOE decision, alongside lower Treasury yields, falling oil prices and a solid rebound in U.S. stock futures.

Fed raises rates for the first time since July 2023

On Wednesday, the Federal Reserve lifted its target range by 25 basis points to 3.75%–4.00%, marking its first rate increase since July 2023.

The decision was unanimous, but updated projections suggested policymakers may not be done. The median projection for the fed funds rate at end-2026 rose to 4.125%, pointing to a possible additional 25-basis-point increase before year-end.

The Fed's message was that inflation remains too high and that further tightening is possible if needed. The next move will hinge on inflation, employment and broader economic data.

Bank of England leaves rates unchanged

As widely expected, the Bank of England held its Bank Rate at 3.75% with a 6–3 vote.

• Six members voted to hold rates steady.
• Three members preferred a 25-basis-point hike to 4.00%.

Governor Andrew Bailey said policy “may have to tighten” if the Middle East conflict “persists for an extended period, as appears likely,” especially if the risk of second-round inflation effects increases.

That leaves the BOE on a possible path toward a November hike if energy prices stay high and begin feeding more broadly into wages, consumer prices and inflation expectations.

Heading into the decision, markets priced in roughly a 76% chance the BOE would hold. The pound slipped afterward as some positioning for a more hawkish outcome was unwound.

The BOE did not hike today, but it clearly left the door open for future action.

U.S. stock futures rebound

U.S. stock futures are sharply higher as equities recover some of Wednesday's post-Fed losses:

• Dow industrial average futures: +473 points
• S&P 500 futures: +70.19 points
• Nasdaq 100 futures: sharply higher

Lower Treasury yields and falling oil prices are giving equities some breathing room even as the Fed signals more tightening may be needed.

The rebound is encouraging for buyers, but it follows a sharp decline after Wednesday's decision. The key question is whether early gains hold after the opening bell or whether sellers use the bounce to re-enter.

Treasury yields retreat

Treasury yields are lower across the curve:

• 2-year yield: 4.7174%, down 1.0 basis point
• 5-year yield: 4.8336%, down 2.1 basis points
• 10-year yield: 4.9733%, down 3.1 basis points
• 30-year yield: 5.3199%, down 2.8 basis points

The 10-year yield has slipped back below the psychologically significant 5.00% level. Larger declines farther out the curve suggest some relief after the recent bond-market selloff.

Lower yields are supporting stock futures and precious metals. Still, yields remain elevated, and the Fed has left the door open for another increase if inflation does not move convincingly lower.

Crude oil retreats toward $100

Crude oil is trading at $100.59, down $1.84 or 1.80%.

The decline comes as worries about an immediate Saudi supply disruption ease. Saudi Arabia is redirecting some shipments, while expectations that parts of the damaged East-West pipeline could return faster than initially feared are taking some geopolitical premium out of oil. Reuters

That does not mean the Middle East risk has vanished. The Saudi pipeline, the Red Sea, Bab el-Mandeb and the Strait of Hormuz remain potential pressure points for global energy supplies.

For traders, $100 remains an important short-term gauge. Staying above $100 would keep crude elevated and inflation concerns alive. A sustained break below would suggest more of the geopolitical risk premium is being priced out.

Gold, silver and copper move higher

Precious and industrial metals are gaining ground:

• Gold: $4,325.68, up $61.15 or 1.43%
• Silver: $64.138, up $1.173 or 1.86%
• Copper: $6.6020, up $0.0930 or 1.43%

Gold's rebound is notable because it comes one day after the Fed raised rates. Higher rates can be a headwind for gold since the metal pays no interest. Today, however, declining Treasury yields and a mixed dollar are providing support.

Silver is outperforming gold, while copper's gain adds to the more positive tone across risk assets.

Bitcoin remains contained

Bitcoin is little changed at $76,200, up $62 or 0.08%.

Despite the strong rebound in stock futures and the drop in Treasury yields, bitcoin has not shown the same upside momentum. That relative underperformance suggests crypto buyers remain cautious after the Fed's more hawkish policy signal.

North American economic calendar

The North American calendar is busy at 8:30 AM ET, led by U.S. housing data, weekly jobless claims and the Philadelphia Fed manufacturing survey.

8:30 AM ET

• Building permits: 1.410M expected versus 1.443M prior
• Housing starts: 1.309M expected versus 1.239M prior
• Initial jobless claims: 208K expected versus 206K prior
• Continuing claims: 1.780M expected versus 1.774M prior
• Philadelphia Fed index: 30.5 expected versus 47.4 prior
• Canada producer prices: +0.6% month over month prior
• Canada raw-material prices: −2.2% month over month prior

The housing figures will offer another read on how elevated mortgage rates are affecting construction. Jobless claims remain important for gauging labor-market conditions, while the Philly Fed's prices-paid component will provide another look at manufacturing inflation.

10:00 AM ET

• Pending home sales: −0.6% expected versus −2.3% prior

Pending home sales track signed contracts and tend to lead completed existing-home sales by one or two months.