Will BoE Send GBP Soaring Higher?

Will BoE Send GBP Soaring Higher?

Will BoE Send GBP Soaring Higher?

Everyone should be watching the GBP/USD the next 24 hours because not only does the Bank of England have a monetary policy announcement but they will also release their Quarterly Inflation Report in which there could be significant revisions to their latest growth and inflation forecasts. Today, sterling traded very strongly against the U.S. dollar on the back of healthier data and if the BoE sounds optimistic, we could see the pair hit 1.4800. However handicapping the bias of the BoE is difficult because while we’ve seen a lot more improvement than deterioration in the U.K. economy since the last monetary policy meeting with the PMIs, inflation and unemployment rate improving, earlier this month Bank of England Governor Carney expressed concerns about inflation and growth and his sentiment could be reflected in the Quarterly Inflation Report. This report also looks back further than the past month and if we take a 3 month perspective, conditions have certainly weakened and lower forecasts are necessary. Since it is hard to gage the central bank’s tone, trades are best taken after the BoE rate decision.

Technically today‘s rally in GBP/USD has taken the currency pair out of a 2 week long consolidation. The pair broke above the 23.6% Fibonacci retracement of the June the January decline and is closing in on the 50-day SMA near 1.4725. That would be the initial target for a post BoE rally in GBP/USD. If the BoE is dovish, we expect GBP/USD to sink to at least the Fib level at 1.4523 and then possibly even 1.44.

Chart Of The Day

Leave a Comment

Your email address will not be published. Required fields are marked *