BOE Monetary Policy Preview: What to Expect of GBP/USD?
Bank of England (BOE) is widely expected to keep rates unchanged and the
minutes are likely to show the interest rate vote count stayed
unchanged at 9-0.
GBP/USD pair made a failed attempt to take out 1.4354 (61.8% of 1.4669-1.3835) earlier this week before dropped to a low of 1.4090 levels in Europe today. The spot is now trading around 1.4145 levels ahead of the BOE rate decision.
Watch out for dovish hints
Latest Reuters poll released yesterday showed majority of economists see a BOE rate cut if Britons vote in favor of Brexit. Markets have also pushed up H1 2016 rate hike bets, again due to fear of Brexit.
Hence, trading community is likely to scan the policy statement and minutes for comments on Brexit and bank’s response if UK votes to leave EU on June 23. Apart from this, comments on inflation and labor market could influence demand for Sterling.
GBP/USD Technical Levels
The latest attempt at recovering losses ran out of steam at hourly 200-MA level of 1.4176, making it a strong resistance, which needs to be breached if prices are to move higher to 1.42-1.4221 (hourly 50-MA). A violation there could signal intraday bearish invalidation, trapping bears on the wrong side and thus helping the pair extend gains to 1.4252 (50% of 1.4669-1.3835).
Conversely, a break below 1.41 would expose support at 1.4079 (Jan 21 low), under which a strong support at 1.4032 (23.6% of 1.4669-1.3835). Beyond the same prices could put 1.40 handle to test.