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Alpha Trade Correct thinking after the Bank of England’s interest rate meeting

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The Bank of England meeting ended last night. Judging from the voting results, although the Bank of England voted 7:2 to keep interest rates unchanged, the voting results have shown that the Bank of England has begun to relax its interest rate cuts and said that it is necessary to cut interest rates at some time in the future. "The right choice", the market has speculated that among the world's major central banks, the UK has the opportunity to become the second country to cut interest rates after Switzerland.


We believe that although the Bank of England's interest rate cut seems to be a certainty in terms of rhetoric, the central bank has not given a clear time point, which somewhat surprises the market, but this is also understandable. Although the current interest rate level is relatively high, it also has a positive suppressive effect on inflation. In the high interest rate environment, economic data did not slow down significantly. On the contrary, PMIs such as the service industry, manufacturing industry, and construction industry all increased significantly. Therefore, the Bank of England still has a lot of patience to observe when it comes to cutting interest rates.

But for the United States, the outlook may be more complicated. Recent U.S. data have shown varying degrees of decline. Non-farm employment fell below 200,000, the unemployment rate rose to 3.9%, and the non-manufacturing PMI fell below 50 in April. The dividing line begins to contrast with the tough-talking attitude of Fed officials. What we agree more is that traders are trying to push up U.S. dollar assets and better cash out U.S. dollar assets in the official interest rate cut. So you can see that despite overnight The pound first hit a new intraday low, but finally closed higher above 1.2500. We believe this trend is a strong signal.


To sum up, in late May, everyone can pay more attention to the bullish trend of the US dollar. We believe that every time the US dollar index rises, it is a good opportunity to short US dollar assets.

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