Jump to content

Bank of England Reaction: GBP/USD Jumps on More Hawkish BoE


MongiIG

633 views

Bank of England Analysis and News

  • BoE Leaves Policy Tools Unchanged as Expected
  • Policymakers Vote 7-2 on Maintain Gilt Purchases, Ramsden Joins Saunders in Hawkish Dissent
  • GBP Breaks Above 1.37 on More Hawkish Statement

image.png

Bank of England left policy measures unchanged as expected with the Bank Rate remaining at 0.1% and gilt purchases at GBP 875bln. However, the vote split on gilt purchases saw Ramsden joining Saunders in calling for a cut to GBP 860bln. Alongside this, the BoE noted that some developments have meant that the case for tightening has strengthen, which in turn has prompted a shift in money markets pricing in a 15bps rate hike for March 2022 vs Previous May 2022. That said, the March meeting is not a quaterly meeting like February or May, making it unlikely that a hike will take place at March.

UK Money Market See Rate Lift Off by March 2022

Bank of England Reaction: GBP/USD Jumps on More Hawkish BoE

Source: Refinitiv

Growth: Bank staff had revised down their expectations for 2021 Q3 GDP growth from 2.9% at the time of the August Report to 2.1%, in part reflecting the emergence of some supply constraints on output. That would leave the level of Q3 GDP around 2½% below its pre-Covid level.

Inflation: The BoE also continue to expect inflation to rise towards 4% in Q4 before returning back to 2% over the medium term and thus sticking with the transitory view on inflation.

GBP/USD: A jump to session highs and breaking above 1.3700 in response to a slightly more hawkish than expected statement. On the topside, near term resistance sits at 1.3722 and 1.3750.

EUR/GBP: Range trading persists in the cross, having once again failed to maintain a foothold above 0.8600 and thus remains the area to fade rallies into. That said, support is situated at 0.8520 and 0.8500. For now, there is little to suggest that this range will see a notable breakout. Short term momentum is neutral, offering little excitement for the cross.

GBP/USD and UK Gilt Yields Immediate Reaction to BoE

Bank of England Reaction: GBP/USD Jumps on More Hawkish BoE

Source: Refinitiv

 

By Justin McQueen, Strategist, 23 September 2021. DailyFX

0 Comments


Recommended Comments

There are no comments to display.

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Blog Statistics

    • Total Blogs
      3
    • Total Entries
      1,935
  • Latest Forum Topics

  • Our picks

    • Swiss Franc Firming Against US Dollar and Euro. Will Momentum Take CHF Higher?
      EUR/CHF made a 7.5-year low at the end of last month at 0.9699, moving below the previous low of 0.9804.

      Since breaking lower, the price has not managed to reclaim 0.9804 and it may continue to offer resistance. The 21-day Simple Moving Averages (SMA)is currently at that level, potentially adding resistance.

      Further up, the recent peak of 0.9957 might offer resistance ahead of the break point at 0.9973.

      In the last session, the price has crossed below the 10-day SMA and remains below the 21-, 55-, 100- and 200-day SMAs.

      A bearish triple moving average (TMA) formation requires the price to be below the short term SMA, the latter to be below the medium term SMA and the medium term SMA to be below the long term SMA. All SMAs also need to have a negative gradient.

      Looking at EUR/CHF, the criteria for a bearish TMA has been met and may indicate that bearish momentum could evolve further.

      Support might be at the recent low of 0.9699 or further down at the 161.8% Fibonacci Extension of 0.9638.

       

      Chart created in TradingView 

      USD/CHF TECHNICAL ANALYSIS

      USD/CHF has bounced off low made at the start of this month at 0.9470 to trade in a wide range of 0.9545 – 0.9650. These levels might provide support and resistance respectively.

      While the price is below all short-, medium- and long-term Simple Moving Averages (SMA), they have positive and negative gradients. This may suggest a lack of conviction for directional momentum that might see further range trading.

      Re-iterating this possibility is the price criss-crossing the 10-day SMA. Recent history has shown that when the price crosses the 10-day SMA, momentum in that direction continues. That is not the case over the last week.

      The recent low of 0.9470 may provide support ahead of the break point at 0.9460. On the topside, resistance might be at the break point of 0.9710 or the July peak of 0.9886.

       Chart created in TradingView

      Daniel McCarthy, Strategist Daily FX

      Source: Daily FX
      • 0 replies
    • Post in FTSE 📈 to drop soon
      Check out phillo's analysis on the FTSE100. Are you tracking any technical analysis for the FTSE you want to share? If so join the forum.
        • Like
    • Rolls-Royce share price: half-year results
      Rolls-Royce shares (LON: RR) sunk by 10% to 83p on Friday after half-year results spooked investors over long-running problems with supply chain issues and inflation.
      • 0 replies
×
×
  • Create New...