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BOE Hikes Again
The BOE took the bull by the horns yesterday and hiked rates by a further .5%, taking the headline UK interest rate up to 5%, its highest level in 13 years. The move comes on the back of the latest UK CPI data earlier this week which showed core inflation moved higher last month while headline inflation remained unchanged at 8.7%, despite expectations of a further decline.
CPI Showing Persistence At Higher Levels
Commenting on the larger-than-expected move, the BOE noted that data recently shows that inflation is being more persistent at higher levels. Expanding on that sentiment, the BOE explained that “second round effects in domestic demand and wage developments generated by external shocks” are taking longer to unwind than first thought.
Growth Fears in Focus
On the back of the inflation data seen earlier this week and this .5% rate hike, market expectations for further BOE rate hikes have jumped. Money markets are now pricing in at least two further .25% hikes this year. Despite this view, GBP has fallen on the back of the meeting as traders now fear a bigger slowdown is coming for the UK given still-hot inflation and higher rates.
Technical Views
GBPUSD
The rally in GBPUSD has stalled for now with price cooling from recent highs. The key test will now be the 1.2659 level and broken bull channel top. While this area holds as support, the focus is on a further push higher towards the 1.2992 level. Below there, however, 1.2437 will be the next support to watch.
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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.