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The BoE is expected to vote for a 50 basis points increase in just 3 hours (1pm local time), its largest increase for more than 25 years. The decision comes in response to the sticky high inflation rate in the UK. Traders will be trying to read through the lines for clues on future guidance. A more committed hawkish BoE could provide a strong momentum to the GBP, which has depreciated nearly 10% against the USD since the start of the year. 

The Japanese yen is in free fall, with the pair USDJPY hitting 136.30 its lowest point since late 1998! The weakness against other major currencies comes as the Bank of Japan has decided to stick to its loose policy contrary to its global counterparts, which are raising interest rates to fight inflation. The spike in USDJPY followed today's Japan's Prime Minister's intervention where he voiced his support for maintaining the current course of the monetary policy by the BoJ.

ECB just released its monetary report; ending net asset purchases as of July 1st, raising key interest rates by 25bps next month, and expects to raise rates again in September. There are also cuts to the growth outlook, 2022's forecast was lowered to 2.8% from 3.7% and 2023's to 2.1% from 2.8%. The calibration for the September hike will depend on the medium-term inflation outlook; a larger raise (50bps)  is on the table should the inflation situation deteriorate. 

The average contract interest rate for a 30-year fixed-rate mortgage increased to 5.4%. Applications for a mortgage to purchase a home fell 7% for the week. Refinance demand dropped 6% for the week and was down 75% year over year. Demand for mortgage applications hit the lowest level in 22 years, hurt by soaring interest rates and a somewhat expensive housing market after the strong run since the start of the pandemic. The soft macro data is a mild positive for stocks. US stocks are recovering in pre-market trading with the S&P500 lower by 0.3% and the Nasdaq100 unchanged.

US futures plunged more than 1.5% as China warned over its economy and the Five-year Treasury yield jump to the highest level since 2008. Investors continue to rush to the safety of the USD as the outlook worsens with no end in sight to China's Covid lockdowns. Real rates (interest rates after inflation) are shooting up higher in positive territory. The short-term outlook for stocks is blurred and volatility is likely to remain elevated. Crypto is also selling off strongly, following the significant selloff in next-gen tech stocks.