GBP Bulls Need BOE to Deliver
BOE Hike Expected
The British Pound is on watch today as traders brace for the latest BOE rates meeting. The bank is widely expected to hike rates by a further .25% and these hawkish expectations have been a key driver of the upside we’ve seen in GBP off the October lows. The question today is whether the forward guidance and updated projections alongside the rate hike will act as a platform for a fresh push higher in GBP or if a more neutral or uncertain message from the bank will cap the rally for now.
Sticky Inflation
UK inflation has been rising again recently and with energy prices still at elevated levels, CPI is unlikely to cool near-term unless we see a shock peace-deal between the US and Iran and plunge in energy prices. Without that, CPI is expected by most to rise above the 4% level into early next year, keeping the need for further BOE action in place. If the BOE does indeed signal that further tightening is likely to needed, along with upward revisions in inflation forecasts, this could propel GBP higher against USD. However, if the bank strikes a more uncertain tone and focuses on the absence of evidence of second round inflation pass-through, this could dampen near-term rate-hike expectations and GBP price action accordingly.
Technical Views
GBPUSD
The rally has seen price trading up to test the 1.3478 level where price is stalled for now. With momentum studies bullish, focus is on a further push towards the triangle highs and the 1.3560 level next. To the downside, 1.33 is the main support if we reverse from here.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.