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Today the BOE rate decision put the bid back into cable as the MOC members suggested that the recent global slowdown will not have much of an impact on the bank’s decision to move off QE. The unit rallied more than 150 points off its lows as traders took the message to heart.
We think the optimism of cable bulls may be premature. Despite the BOE’s tough talk on monetary policy the fact on the ground show that UK economy has hit a brick wall as the global slowdown is clearly taking a toll on demand. Tonight the market will get a glimpse at Construction Output and Consumer Inflation Expectations and though the data is decidedly second tier – it nevertheless is likely to show further deterioration in UK growth.
All of this is fundamental data should begin to weigh on cable once again and GBP/CHF which has probed and failed the 1.5100 level several times over the past few days is likely to get pulled lower as bear try to test the 1.4700 support level. Only a strong break above the 1.5250 zone would negate the bearish thesis.