MNI US OPEN: BoE Set To Hike

FIXED INCOME: BOE in focus after Fed meeting

Core fixed income is higher on the day, with USTs, Bunds and gilts all higher than their pre-FOMC levels but with flatter curves. After moving lower early in the European session, we have recovered some losses, particularly after gilts opened.

• The focus today will be on the BOE where we and the market look for a 25bp hike. SONIA futures are a little lower following the Fed through Whites and early Reds, but are higher through later Reds, Greens and Blues. There is a real disconnect between market pricing and what economists aresaying at present regarding the BOE. Markets are now looking for about a 25% probability of a hike today with 6.8 25bp hikes priced in for the remainder of 2022. The economist consensus looks for 3 hikes (including today). We think it's a 7-2 vote that would be close to neutral for a market reaction. Of course this has the caveat of what happens to the forward guidance and whether the "coming months" time contingency remains. But given the split between economists and markets, it's much more uncertain this time than normal exactly what the market is pricing for today's meeting. For our full BOE preview click here.
• TY1 futures are up 0-13 today at 124-20+ with 10y UST yields down -6.4bp at 2.124% and 2y yields down -1.4bp at 1.927%.
• Bund futures are up 0.15 today at 161.22 with 10y Bund yields down -1.3bp at 0.376% and Schatz yields up 1.5bp at -0.327%.
• Gilt futures are up 0.42 today at 121.55 with 10y yields down -3.7bp at 1.591% and 2y yields down -0.9bp at 1.391%.

FOREX: Greenback Follows 2y Yield Off Yesterday's Highs

• The greenback is extending post-Fed decision losses, with the USD Index slipping to the lowest levels since Mar10 in overnight trade. The main beneficiaries so far have been the AUD and GBP, which top the pile in G10 so far. The greenback remains highly correlated with front-end US yields, with the USD Index following the US 2yr yield off yesterday's highs at 1.9956% - which has moderated further through the European morning.
• AUD/USD has managed to recover above the 200-dma at 0.7304, allowing the bearish corrective leg lower at the end of last week. This signals a possible resumption of the uptrend that started Jan 28. Moving averages remain in a bull mode and highlight an uptrend. An extension would open 0.7368, Mar 10 high and 0.7441, the Mar 7 high and bull trigger.
• Following the solid close on Wall Street, European equities have had a more sanguine start, with focus remaining on the Ukraine conflict, as markets attempt to gauge the progression made in peace talks across the week.
• Focus turns to the Bank of England rate decision, at which the MPC are seen raising rates by 25bps to 0.75% - with attention paid to the vote split among the rate-setting committee. Weekly US jobless claims data is also due, along with the February US Industrial Production read.

EQUITIES: Hong Kong Leads Gains, Europe And US Mostly Lower

• Asian markets closed sharply higher, led by a recovery in the Hang Seng: Japan's NIKKEI closed up 890.88 pts or +3.46% at 26652.89 and the TOPIX ended 45.76 pts higher or +2.47% at 1899.01. China's SHANGHAI closed up 44.334 pts or +1.4% at 3215.044 and the HANG SENG ended 1413.73 pts higher or +7.04% at 21501.23.
• European equities are mixed, with the German Dax down 75.24 pts or -0.52% at 14366.73, FTSE 100 up 16.73 pts or +0.23% at 7308.14, CAC 40 up 20.59 pts or +0.31% at 6609.17 and Euro Stoxx 50 down 15.23 pts or -0.39% at 3875.27.
• U.S. futures are slightly lower, Dow Jones mini down 36 pts or -0.11% at 34023, S&P 500 mini down 8.25 pts or -0.19% at 4350, NASDAQ mini down 40.75 pts or -0.29% at 13912.25.

COMMODITIES: Oil Bounces Back From March Lows

• WTI Crude up $3.54 or +3.72% at $98.69
• Natural Gas down $0.03 or -0.61% at $4.72
• Gold spot up $10.03 or +0.52% at $1936.98
• Copper up $4.95 or +1.08% at $465.2
• Silver up $0.2 or +0.78% at $25.2811
• Platinum up $5.88 or +0.58% at $1027.01