What will the BOE do for the GBPUSD rally?
Looking at today’s BOE decision, we may have thought there could potentially be a slight chance at a hold as inflation was seen as possibly peaking. Evidently, this wasn’t the case, as the last data showed a surprise increase which looks to put in some confusion with the current situation.
The last inflation data came in at 10.4%, well above the expected 10.1%. Rates are expected to be increased by 25 points today, bringing rates up to 4.25%. This will be the 11th successive rise if we see it today. This rate rise could be priced in, so what is the outlook now following the latest data from the BOE? Is it enough to shift their opinion to a more hawkish stance?
The GBPUSD has seen a nice run of late, so far, two higher weeks in a row after a flat finish after a solid fightback. Looking forward, buyers face resistance at 1.2425, and there’s minor support along the current trend at 1.2050 and 1.2195.
We feel that the policy summary could make or break the current run. If we hear a more hawkish tone based on the last inflation data, this could point to further hikes and could give the GBPUSD some upward momentum. How the BOE sees the last data and the current situation will be a focus, and if they discount it and remains more on the dovish side, this could set off downward pressure that tests the current up leg.
The BOE rates decision will be held at 11:00 pm AEDT.
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