BOE Hikes As Expected
The Bank of England pressed ahead with its third-rate hike in just four months yesterday. Governor Andrew Bailey announced a .25% hike, well in line with market expectations, citing the need to combat soaring inflation. While there are concerns about the further pressure this will put on consumers and UK households, The BOE cited the violence in Ukraine as presenting grave upside risks for prices.
Inflation Surging
The BOE explained that the Russian invasion of Ukraine has led to a heavy uptick in energy prices as well as the costs of commodities and food items. Additionally, the bank noted that these effects are likely to continue for some time, adding a great deal of uncertainty to the global economic outlook.
Looking ahead, the BOE now forecasts that inflation might peak around 8% this year, up from the prior 7% estimate. However, the tone of the meeting seemed to stray more into the territory of caution, perhaps explaining why GBP is a little muted today.
Growth Fears
The BOE expressed its concern over the impact the current inflationary surge is having on the economy. With the elevated energy prices and supply chain issues already gripping the UK ahead of the Ukraine conflict. Looking ahead, traders seem to be sensing growth issues for the UK, as we saw in reaction to the Fed’s announcement this week. As such, the rate hike has done little to drive GBP higher here.
Technical Views
GBPUSD
For now, GBPUSD continues to hold in the bottom end of the bear channel, caught between support at 1.3031 and resistance at 1.3196. While below here, the focus is on a continuation lower. However, with momentum studies turning higher off recent lows, a break above 1.3196 will likely encourage fresh momentum for a test of the 1.3349 – 1.3461 region next.
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.