Today’s focus is squarely on BoE’s rate decision, with significant uncertainty surrounding whether the first rate cut will be initiated to kick-start the policy easing cycle.
Communications from various MPC members have shown no clear consensus. Known dove Swati Dhingra is expected to continue pushing for a rate reduction, urging BoE to stop squeezing living standards. Conversely, hawkish members like Catherine Mann are likely to guard against resurgence of inflation pressures, viewing the dip to 2% as “touch and go.”
Chief Economist Huw Pill has stated that it’s still an “open question” on whether rate cuts should start now. Adding to the uncertainty, Deputy Governor Clare Lombardelli, who is voting for the first time, remains a big unknown factor in today’s decision.
Markets are currently pricing in around a 60% chance of a quarter-point cut today.
GBP/USD has been in steady but slow downward spiral since hitting 1.3043 in mid-July. For now, risk will stay on the downside as long as 1.2936 resistance holds. Sustained trading below 55 D EMA (now at 1.2783) as well as near term channel support (now at 1.2781) will argue that whole rally from 1.2298 might be over. Deeper fall would then be seen back to 1.2612 support. Nevertheless, break of 1.2936 will suggest that the pull back from 1.3043 has completed, and rise from 1.2998 is ready to resume. We’ll know very soon.
