BOE Cuts Rates Again
GBPUSD ended the day higher yesterday despite the BOE cutting rates by a further .25%, taking the headline UK interest rate down to 4%. Support for the move was less enthusiastic than expected, however, with the voting split shifting from 0 – 3 – 6 to 0 – 5 – 4, less dovish than the 0 – 8 – 1 split the market was anticipating. Indeed, the bank struck a far less dovish tone in its guidance, warning that upside inflationary pressures remained a key threat. With this in mind, the bank signalled that it was nearing the end of its easing cycle. Speaking at the post-meeting presser, BOE governor Bailey said that yesterday’s cut was a finely balanced decision and while rates remain on a downward path for now, any further rate cuts would need to be gradual and made carefully.
BOE Outlook
Looking ahead, expectations are now heavily divided over whether the bank will cut again this year. In its updated economic forecasts, the BOE now projects inflation to top 5.5% this year, driven by a surge in food prices. Against this backdrop, a further cut looks hard to back. As such, GBPUSD has room to continue higher near-term, particularly if current USD weakness extends into the September FOMC.
Technical Views
GBPUSD
The rally in GBPUSD has seen the market trading back up to test resistance at the 1.3427 level as well as the bear trend line from YTD highs. With momentum studies turning higher, if bulls can break above this level, focus turns to the 1.3631 level as the next bull target.
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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.