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Pound Drops On Decreased BoE Rate Hike Odds

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Dear Traders,

Thursday has proved to be a high volatile trading day which became most visible in the pound’s price action following the BoE Super Thursday rate decision. While we have focused on a potential short squeeze in the GBP/USD, provided that the Bank of England would have maintained its hawkishness, the opposite scenario happened. The BoE went dovish and disappointed sterling bulls that had hoped for a bullish reversal from the pound’s lows. BoE policy makers decreased their near-term hawkish monetary policy expectations and noted that inflation may have peaked. Inflation and GDP forecasts were lowered. BoE Governor Mark Carney was back to the previous ‘slower and gradual’ rate hike path instead of warning that rate hikes could happen faster than expected.

Consequently, rate hike bets for an August rise fell to 42 percent from 62 percent. The most likely meeting for when a rate hike would occur is probably the November meeting, with a current priced-in probability of 64 percent.

As for the U.S. dollar, U.S. inflation numbers disappointed but, looking at the price action in the EUR/USD and GBP/USD, the greenback refrained from showing any signs of weakness shortly after the numbers were released. However, even though inflation numbers came in weaker-than-expected, the Fed is likely to maintain its current rate hike path.

GBP/USD: The cable bounced off the rising trendline refraining from a climb above 1.3620 and finally headed for a break below the 1.35-support. At the end of the day however, the pound was more or less unchanged against the dollar with any larger swings lacking.

We will now focus on a trading range between 1.3630 and 1.3440. Any breakouts above or below these levels can spur momentum to the respective direction.

EUR/USD: The Euro tested the area around 1.1950 and euro bulls should keep an eye on a potential run for 1.20 now. As long as the euro remains above 1.1880 we favor the upward momentum.

ECB President Draghi will speak in Florence today at 13:15 UTC.

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USD Falls On White House Instability, EUR And GBP Trend Upwards

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Dear Traders,

The pound was yesterday’s best performer while GBP/USD broke above a descending trend line that is held in the cable since January. As mentioned in previous analysis, we now take a rather bullish stance in this pair but recommend long-term oriented traders waiting for a bullish break of the 1.40-barrier.

The U.K.’s Spring Budget statement has helped the pound to regain some strength as growth forecasts were upgraded.

U.S. CPI data, on the other side, was not strong enough to alter Fed rate hike expectations and thus, the dollar weakened against other major peers. The next FOMC meeting is on March 21 but with inflation holding steady, market participants are bracing for a dovish rate hike next week.

Meanwhile, the dollar came under increased pressure as White House instability continues. U.S. President Trump fired Secretary of State Rex Tillerson and this sudden staff turnover comes only one week after Gary Cohn resigned from the White House. Trump administration concerns generally pose a threat to the greenback.

GBP/USD: The pound broke out of its triangle formation and headed towards 1.40. We now wait for a sustained break above that psychological barrier in order to anticipate further gains towards 1.4070 and 1.4150. A lower support is seen around the 1.3830-level.

EUR/USD: The euro traded with a tailwind on the back of a weakening dollar while breaking above 1.2370. As expected in Monday’s analysis, that upside break encouraged bulls to drive the euro toward a test of 1.24 and it will be interesting whether the single currency is able to stabilize above that level.

Today we will listen to ECB President Draghi’s speech at 8:00 UTC and keep an eye on the U.S. Retail Sales Report scheduled for release at 12:30 UTC.

Daily Forex Signals:

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View our daily signal alerts https://www.maimar.co/category/daily-signals/

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2018 Maimar-FX.

www.maimar.co