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BOE No Surprises and none expected

Market Analysis

GBPUSD, H1

The BoE left monetary policy unchanged by unanimous votes on the nine-member Monetary Policy Committee, as had been widely anticipated. That leaves the repo rate at 0.5%, and gilt purchase target at GBP 435 bln and the corporate bond purchase target at GBP 10 bln. The BoE stated that recent news on the economy has been “mixed and relatively limited,”, but while global growth has remained strong, some domestic activity indicators “suggest GDP growth in Q4 might be slightly softer than in Q3.” On inflation, the BoE stated that while CPI has been pushed above target by the boost to import prices that resulted from the past depreciation of sterling, it judges that inflation “is likely to be close to its peak, and will decline towards the 2% target in the medium term.” The softer growth signal for the current quarter and relatively benign inflation outlook catalysed a dip in Gilt yields and sterling, which tumbled about 40 pips against the dollar in the wake of the announcement, making a low at 1.3410.

Technically, the H1 chart has support at 1.3400 and the 200 period moving average with next support at the H1 lower Bollinger band and H4 support at 1.3360. Resistance on H1 and H4 coexist at 1.3470.  RSI has dipped from overbought to 56 and falling, with the Stochastics also turning negative, the parabolic SAR remains negative.

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Stuart Cowell

Senior Market Analyst

HotForex

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