BOE Holds Rates Steady
GBPUSD is softening again today after the pair enjoyed a solid recovery rally yesterday as the BOE left rates on hold. GBPUSD jumped around .7% in response to the unchanged decision from the BOE, with the move amplified by an accompanying sell off in USD. However, the decision to hold rates steady was achieved with a narrow margin of 5-4. Indeed, the minutes of the meeting (which include reasoning from each dissenter) show that there is a strong body of support for further easing and that, ultimately, it was Bailey’s vote which swung things this time around. Bailey’s own reasoning looks to be that inflation risks have become more balanced making further easing a tougher call at this point.
December Easing Forecasts
Looking ahead, focus is now on the December BOE meeting with the market currently pricing in around d70% odds for a cut. It’s likely that Bailey will be the deciding vote again at that meeting. However, if inflation can avoid any upside surprises between now and that meeting a rate cut seems more likely than not. Indeed, if we see fresh downside in inflation data ahead of that meeting this should see rate cut expectations rising, putting further pressure on GBP near-term as we move towards that meeting.
Technical Views
GBPUSD
The sell off in GBPUSD has seen the market breaking down below the .13177 level with price bouncing off the 1.30 support for now. 1.3177 remains the key pivot with bulls needing to get back above that level to alleviate risks of a further breakdown towards the 1.2711 level.
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