At its latest policy meeting, the Bank of England's Monetary Policy Committee voted by a majority of 7-1 to leave the bank rate at 0.25%, with Kristin Forbes being the only one favouring an immediate hike in rates on the back of an uptick in pipeline inflation pressures that, in her opinion, has pushed the CPI to somewhat uncomfortable levels. Overall, the "no move" came as no surprise, as the vast majority of economists were not expecting to see any change in the monetary policy. In the report, the BoE said that sustainability of the current loose policy would to a great extent depend on inflation expectations holding steady. Despite that, some of the MPC members commented they would give up their dovish stance relatively soon should they see any signs of an upside momentum establishing in GDP or inflation.
In the meantime, the British Central Bank also decided to maintain its government bond-purchase programme at £435B, while holding corporate bond-buying plans at up to £10B. Furthermore, there also were some alterations to the Bank's UK economic forecasts, with officials slashing their 2017 growth outlook to 1.9% from 2%.
US CPI and Retail Sales to focus on
GBP/USD continues to consolidate
The GBP/USD currency pair underwent another decline on Thursday, driven mostly by weak fundamental data from the UK. However, the decline helped to prolong the consolidation trend, which began three weeks ago. It is yet uncertain whether the 1.28 or the 1.2850 level is the trend's lower boundary, but the 1.30 mark is representing the upper one. As a result, the Cable still has room for another leg down, despite being supported by the weekly S1 and the 20-day SMA demand cluster just under today's opening price. Meanwhile, technical indicators keep insisting that a positive development is due, but that is possible only if the US inflation data disappoints today.
Daily chart
Hourly chart
Traders remain neutral
Traders retain a neutral outlook, with 51% of all open positions still being short. The number of sell orders inched up from 51 to 56%.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 68% of all open positions are short and the remaining 32% are long. Meanwhile, sentiment at Saxo Bank slightly improved, but still remains strongly bearish, with 60% of traders now being short and the other 40% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
By the end of the next three months traders believe the Cable is to rise above the 1.30 major level, as 59% of survey participants believe so. While the current price is around 1.29, the average forecast for August 12 is 1.3034. The 1.32-1.34 range is now the most popular price interval, having 16% of the votes, while second comes the 1.30-1.32 interval with 15% of the voters, and the third place is tied by the 1.34-1.36, with 13% of poll participants choosing this option.