On Thursday, the Bank of England surprised markets by holding interest rates, despite hints from Governor Mark Carney that policy easing could be possible made earlier. Economists had expected a rate cut of 25 points to 0.25%, which would have been the first rate change in seven years. Following assumptions appeared after the Brexit referendum on 23 June, when Britons widely vote to leave the European Union. According to the minutes of the meeting, the Bank's Monetary Policy Committee voted by 8-1 to hold rates, as well as hinting that they "expect monetary policy to be loosened in August". Moreover, the BoE announced in its policy statement that they would give another month to evaluate the Brexit's impact on the economy and probably would raise stimulus measures in August. Currently, the bank's benchmark rate equals 0.5%. Following decision is widely appreciated by economists, since many experts are saying the Bank made the right decision by leaving interest rates unchanged.
In the meantime, the Pound advanced while shares, in turn, dropped after the Bank of England unexpected decision. The Cable added around 1.4%, or two cents, versus the dollar reaching $1.3326.
UK Inflation Data and US Building Permits
GBP/USD muted ahead of UK CPI data
Demand, represented by the weekly PP, was sufficient to cause the Sterling to outperform the US Dollar, with the pair adding slightly more than 50 pips yesterday. Positive UK fundamentals could prompt the Cable to move higher again, but technical indicators retain bearish signals, suggesting that a bearish development is more likely. In this case the weekly PP is to fail to keep the GBP/USD currency pair elevated, and a drop towards a one-week of 1.2970 will be possible. The second support, however, rests around 1.2830, formed by the weekly S1 and the one-year trend-line, a cross of which is doubtful.
Daily chart
Hourly chart
Bulls remain in control
Market sentiment slightly weakened again, as 57% of all open positions are now long, compared to 59% on Monday. At the same time, the number of orders to sell the Pound decreased from 65 to 62%.
Compared to Friday, there are slightly less bulls at OANDA - they take up 53% of the positions open with the Canada-based broker. Sentiment at Saxo Bank weakened further, as here the number of bears exceeds the number of bulls by 2 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.40 in three months
More than half of traders (70%) believe the British currency is to cost 1.40 or less dollars after a three-month period. The most popular price intervals was selected by only 17% of the voters, namely the 1.28-1.30 one, while the second most popular choice implies that the Sterling is to cost between 1.24 and 1.26 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for Oct 19 is 1.3545.