The November meeting came and went without any fanfare. As expected Mark Carney and co. at the MPC kept their powder dry and did not shift interest rates or asset purchases at this meeting. The BOE did not release a statement, instead leaving us with bated breath for next week's Inflation Report.
This report is likely to be markedly different from the last one in August, when the BOE announced its forward guidance programme. This time the focus is on how the BOE will upgrade its growth and employment forecasts, thus pushing forward the prospect of rate hikes from Q3 2016 without causing havoc in the markets and long-term Gilt yields to rise sharply.
It's the economy, stupid.
The sustained strength of the UK's economic recovery has scuppered the BOE's first iteration of forward guidance. It will be interesting to see if the BOE embarks on forward guidance 2.0 next week. Carney could challenge the stunning survey data (PMI) and instead question the strength of the real economy; he could also widen the economic threshold to focus on wage growth, which has remained stubbornly weak. If the BOE takes this track then it could disrupt the pound's recent rally.
Although it will be next week's Inflation Report that steals the headlines and has the biggest impact on the future path of UK interest rates, we expect the BOE was united once again ion voting to keep rates and asset purchases unchanged. We will find out what the vote split was on 20th Nov when the minutes of this meeting are released.
GBPUSD: 1.5980 - 50 day SMA - could cap any downside
GBPUSD barely budged after the BOE announcement and has been in a tight range all morning as we wait for the ECB and the NFP tomorrow. It continues to hover around a key resistance zone between 1.6055-75- the Tenkan and Kijun lines on the daily cloud. As long as we stay above here the immediate outlook is fairly bullish, which opens the way to 1.6120 then 1.6260 - the high from 1st October and a key resistance level.
Unless we get a major shock in tomorrow's US NFP's, we believe that GBPUSD could grind higher into the Inflation Report next week as the market expects the BOE to revise up its growth forecasts and revise down its forecast for the unemployment rate. Key support lies at 1.6030 - the low from 5th Nov, then 1.60 - a key psychological level, ahead of 1.5980 - the 50-day sma and a critical support level.
This report is likely to be markedly different from the last one in August, when the BOE announced its forward guidance programme. This time the focus is on how the BOE will upgrade its growth and employment forecasts, thus pushing forward the prospect of rate hikes from Q3 2016 without causing havoc in the markets and long-term Gilt yields to rise sharply.
It's the economy, stupid.
The sustained strength of the UK's economic recovery has scuppered the BOE's first iteration of forward guidance. It will be interesting to see if the BOE embarks on forward guidance 2.0 next week. Carney could challenge the stunning survey data (PMI) and instead question the strength of the real economy; he could also widen the economic threshold to focus on wage growth, which has remained stubbornly weak. If the BOE takes this track then it could disrupt the pound's recent rally.
Although it will be next week's Inflation Report that steals the headlines and has the biggest impact on the future path of UK interest rates, we expect the BOE was united once again ion voting to keep rates and asset purchases unchanged. We will find out what the vote split was on 20th Nov when the minutes of this meeting are released.
GBPUSD: 1.5980 - 50 day SMA - could cap any downside
GBPUSD barely budged after the BOE announcement and has been in a tight range all morning as we wait for the ECB and the NFP tomorrow. It continues to hover around a key resistance zone between 1.6055-75- the Tenkan and Kijun lines on the daily cloud. As long as we stay above here the immediate outlook is fairly bullish, which opens the way to 1.6120 then 1.6260 - the high from 1st October and a key resistance level.
Unless we get a major shock in tomorrow's US NFP's, we believe that GBPUSD could grind higher into the Inflation Report next week as the market expects the BOE to revise up its growth forecasts and revise down its forecast for the unemployment rate. Key support lies at 1.6030 - the low from 5th Nov, then 1.60 - a key psychological level, ahead of 1.5980 - the 50-day sma and a critical support level.
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