Bullish Breakout

The British pound experienced a bullish breakout despite the Bank of England which disappointed with a 25bp rate hike move. U.K. inflation is expected to hit as high as 11% later this year. The BoE however signaled that it is prepared to unleash larger moves if needed. Trading the cable was messy yesterday, with an initial bearish move towards 1.2040 that quickly reversed and now the pair is trading above 1.23. In other words, we weren’t able to catch the big gain we were looking for.

GBP/USD tested the 1.24-resistance from where it bounced off. If the pair holds above 1.2250/1.22, sterling bulls may try to push for a test of 1.25. Below 1.2140 however, we expect the pair to head south with lower targets seen at 1.1950 and 1.19.

The EUR/USD rose on more hawkish ECB expectations and tested the 1.06-level. As long as the 1.0350-support holds, gains could be extended towards 1.07 and 1.08.

Have a good weekend.

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