BOE Speaks on Rates
GBP is on watch today after dovish comments from BOE governor Bailey. The BOE head warned that the bank cut rates more aggressively if the UK jobs market slows further. Speaking in an interview with UK newspaper The Times Bailey reiterated his view that the path for UK rates is downward and saif that while his guidance is still to expect ‘careful’ and ‘gradual’ easing, there is room for the bank to accelerate its easing program if greater slack opens up in the UK labour market. Indeed, Bailey warned that this could be the case even with inflation remaining above target currently.
UK Inflation On Watch
Looking ahead, market pricing is turning in favour of expecting a fresh .25% cut from the BOE when it meets on August 7th. Recent weakness in labour market data as well as two consecutive negative monthly GDP readings have fuelled an uptick in bearish market sentiment, reflected in the weaker GBP we’ve seen over the last few weeks. Traders will now be closely watching incoming UK inflation data due on Wednesday. If there is any weakness in CPI this should be seen as cementing the chances of a cut next month, driving GBP sharply lower near-term. On the other hand, any upside surprise might muddy the outlook once again, keeping GBP supported for now.
Technical Views
GBPUSD
The sell off in GBPUSD has seen the market trading back down to test the bull channel support line and 1.3427 support area. This is a key pivot which bulls need to defend in order to maintain the broader bull trend. Below here, 1.3264 will be next support ahead of a deeper reversal lower in line with falling momentum studies.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.