The Bank of England kept its key interest rates unchanged at its September meeting despite the post-Brexit pressure, official data revealed on Thursday. The bank's policymakers voted anonymously to maintain the central bank's benchmark interest rate at its new, historically low, level of 0.25%. Furthermore, they voted 9-0 to leave the Central bank's bond buying program target level at 435 billion pounds as well as to stick to its new plan to buy up to buy 10 billion pounds of high-grade corporate bonds. Nevertheless, the BoE pointed to persistent risks of Britain's economic slowdown. Also, the Central bank revised up its Q3 GDP growth forecast to 0.3% from the previous projection of 0.1% made in August. All figures came in line with analysts' expectations.
Other data released on the same day showed the country's retail sales decreased less than expected despite the Brexit vote. According to the Office for National Statistics, Britain's retail sales dropped 0.2% month-over-month in August, following the preceding month's upwardly revised gain of 1.9% and surpassing the 0.4% fall forecast. On an annual basis, sales volumes rose 6.2% last month, compared to July's 5.4% rise. Excluding fuel, retail sales climbed 5.9% year-over-year in August, posting the largest increase since November 2014.
US prices to grow 0.1%
GBP/USD's rallies limited by 1.3320
The Cable saw no change yesterday, finishing the day at the open price after testing both the resistance trendline and weekly S1 that is currently acting as support. Nevertheless, the bias is bearish, as the currency pair has recently broken out of the ascending channel to the downside. Next week we could see GBP/USD probing 1.2880 (August low and monthly S1), but there is also a notable demand area closer to the spot price, namely at 1.3126/12. This support zone is created by the monthly PP and weekly S2.
Daily chart
Hourly chart
Traders remain undecided
SWFX sentiment remains unchanged in the sense that the difference between the numbers of bulls and bears is still insignificant—only 2 percentage points. In the meantime, we could note that the percentage of long positions went from 46 to 51%.
The same situation is observed elsewhere. For example, 54% of positions open at OANDA are currently long. This is more than the share of shorts (46%), but not enough for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also neutral, with 53% of traders being long and 47% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be more or less at the same level where it is now. While the current price is 1.3230, the average forecast for December 16 is 1.3220. Interestingly enough, however, the 1.32-1.34 interval is the least popular along with <1.24, having only 6% of the votes each. Most of the votes are concentrated in 1.36-1.38 (15%), 1.28-1.30 (15%) and 1.34-1.36 (14%) intervals.