By Michael Baker

One of the many highlights that have traders glued to their screens is tomorrow’s Bank of England (BOE) meeting where we are expecting some action. The markets have priced in a high chance of a 25bp rate hike to 0.75% with an expected 7-2 vote in favour of a move. Expectations of a hike in 2018 have remained elevated although the exact timing of the move has been pushed back by Governor Carneys cautious comments in April over the weaker than expected Q1 readings. The hike is being seen as a parting gift to BOE voter and uber-hawk Ian McCafferty as this will be his final meeting.

There is a risk that no policy change is taken, which may see the Sterling come off sharply, but expectations are that the rate will hike and Sterling may see some spikes. Future projections from the committee are unlikely to differ from what we heard in May’s meeting, where economic growth was downgraded from 1.8% to 1.4%. The upgrade in Q1 growth to 0.2% along with some batches of positive data suggest that 2018’s growth will be inline and not too far from 1.4%. Revisions up to this number by the bank may give Sterling a boost.

The GBP/USD is still following a downward trend and has come to a halt in the latest push up as we await details from the latest BOE meeting. The fib retracements will come into play if we push up above the upper trend, however, we would be looking for a significantly Bullish statement from the BOE to push up to these levels. A hike will cause market volatility for sure, but with a large amount of a potential hike priced in Bears will be looking for an overreaction.

GBPUSD Daily Chart – Market Trading Firmly Within a Downwards Moving Trend

ETX_CHART_BOE_TREND

Source: ETX Capital



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