The Bank of England shocked the market yesterday by keeping interest on hold, disappointing hawkish rate hike bets. The pound dropped almost two percent from our short entry, providing sellers a very good gain. BoE officials voted 7-2 to keep the benchmark interest rate at a record low of 0.1 percent. Defending the BoE’s decision, Governor Andrew Baily said that policy makers will focus on jobs and the risks to economic growth instead of inflation.
Bets on the first 15-bp BoE rate hike are now pushed back to February.
GBP/USD: As traders digest the shock, the pound may be vulnerable to further losses. A next lower target comes in at 1.3415, followed by 1.3330. A lower resistance is currently seen at 1.3650.
All eyes now turn to the U.S. nonfarm payrolls report today at 12:30 UTC.
Analysts expect the NFP report to cross the wires at 450k for October. That is more than double the 194k September print. A better-than-expected figure will strengthen the Fed’s basis for more tightening and will benefit the U.S. dollar. Alternatively, a poor print is likely to do the opposite with the greenback vulnerable to losses.
We wish you all a beautiful weekend!
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