BoE Disappoints, Pound Falls, What’s Next?
The Bank of England disappointed investors that have been buying the British pound ahead of the Inflation report as the medium-term inflation forecast came in lower than expected. Traders who had hoped for a hawkish tone or more than one dissent calling for a rate hike in the BoE’s monetary policy statement were disappointed. Officials cut their economic growth forecasts this year to 1.9 percent from 2 percent. While the BoE sees a slightly weaker path in the medium-term it expects inflation to be accelerating again by the end of 2019. To sum up, it can be said that the central bank is moving more slowly with a potential rate hike not being in the cards until 2019.
The pound dropped in response to the weaker forecasts but the slide came to a halt at around 1.2850. If sterling climbs back above 1.29 and is able to hold above that level we shift our focus back to a potential test of the 1.30-resistance level.
Today, traders will pay close attention to important U.S. economic reports such as Retail Sales and Consumer Prices, both reports are due for release at 12:30 UTC. Investors are looking for a positive reading, confirming that the U.S. economy is picking up the pace enough to withstand higher interest rates. However, a disappointment in U.S. data could send the dollar lower, providing the basis for fresh upswings in the cable and euro.
Last but not least, University of Michigan Confidence is due for release at 14:00 UTC.
We wish you good trades and a wonderful weekend.
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