XAG/USD holds above $23.00 as BoE contributes to supportive dovish central bank vibes

• Silver is currently holding above $23.00 and is on course for a second day of gains amid dovish central bank sentiment.
• The Fed ruled out interest rate hikes of 75 basis points on Wednesday and the BoE sounded the alarm about a possible recession in the UK.
• The focus now shifts to Friday’s official US jobs report.

Spot silver (XAG/USD) prices held above the $23.00 a troy ounce level on Thursday after markets took the latest BoE policy announcement as dovish, a day after a less hawkish than feared policy announcement fed At the current level of $23.10, XAG/USD is trading with daily gains of more than 0.5%, taking its two-day rally to over 2.0% and the recovery from earlier week lows at $22.12 to more than 4. brings 5%.

After the Fed hiked rates by 50 basis points as expected on Wednesday and ruled out a rate hike at more aggressive 75 basis point intervals at forthcoming meetings, which analysts said removed some downside risk for precious metals, the BoE warned of a recession in the U.K. economy in 2023, but still raised interest rates by 25 basis points on Thursday. Ahead of Friday’s release of US April jobs report, dovish central bank sentiment is likely to support XAG/USD above $23.00.

The precious metal could even rally to test its 200-day moving average in the $23.75 area. But it is still premature to bet on a more significant recovery back to, say, the April highs of $26.00. While the BoE is unlikely to tighten much more on monetary policy amid growing concerns about UK economic growth later in the year and worries about the bank’s ability to meet its long-term inflation targets, the Fed’s policy risks remain tilted in favor of another radical shift .

Although interest rate hikes of 75 basis points were ruled out on Wednesday, Fed Chair Jerome Powell was keen to reiterate that the Fed prioritizes cutting inflation above all else. If inflation doesn’t ease as much as the Fed expects (or hopes) in the second half of this year, there is a risk that the Fed will signal interest rates to rise well above the so-called “neutral” rate.

This could trigger further long-term upside in USD and US yields, which could weigh heavily on silver. Rallies can therefore continue to be sold and many XAG/USD bears will continue to aim for a test of the 2022 lows around $22.00.