BoE To Shock The Market With A Bigger Rate Hike?

What a trading day!

The Federal Reserve raised rates by 75bp, the biggest interest rate increase since 1994 and prices whipsawed. The EUR/USD tried to break its crucial support around 1.0350 with an all-time low sitting at 1.0340 but such historical bearish break seemed to be precipitously which is why prices consolidated around 1.0450, for now. The British pound rose on elevated rate hike expectations and provided some good profits for traders at the end of the trading day. The central bank’s aggressive tightening brings the economy closer to a recession and the effects will only be felt later on. In other words, we still have a long road ahead of us.

Today all eyes will turn to the Bank of England’s rate decision and to the British pound’s reaction to it. The BoE is expected to hike rates by (only) 25bp, compared to yesterday’s big Fed move. The risk for the GBP/USD is to the downside, since the BoE may have to take a more cautious approach to raising rates after data showed a surprise contraction in the U.K. economy in April. Most attention will be paid to the vote split of today’s decision for further insight into the BoE’s overall appetite for higher rates.

The BoE rate decision is due at 11:00 UTC.

A bigger-than-expected rate hike would be a shock and could send the pound above 1.2210 and further to a higher target of 1.23. Bears on the other side should pay attention to a slide below 1.2080 which could see another test of 1.20.

Our trading ideas for today 16/6/22:

GBP/USD

Long @ 1.2160

Short @ 1.2115

We wish you good trades!

Any and all liability of the author is excluded.

www.maimar.co

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