Article by ForexTime

The GBP/USD dropped to a weekly low to 1.6010 but since has bounced following a more dovish than expected  BoE minutes. The minutes showed increasing dovish language of the seven voters in favor of unchanged policy, which fits both recent data and most BoE-speak of late. Markets have in recent weeks pushed back expectations for a quarter point hike to mid-2015 from the first quarter of 2015, a process which looks likely to continue.

The Bank of England minutes to the October Monetary Policy Meeting meeting showed 7:2 vote split to leave the repo rate at 0.5% and the quantitative easing total at 375 billion, as expected with members McCafferty and Weale dissenting in favor of a 25 basis point repo rate hike for the third consecutive month. They repeated the argument that making a gradual tightening would be better sooner than later to avoid unbalancing the economy further down the road.

The minutes also showed dovish language of the seven voters in favor of unchanged policy, which fits both recent data and most BoE-speak of late. These members saw “few signs” of building inflation pressures, even with the disinflationary effect of a firmer currency stripped out of the equation. The minutes noted that pay growth was lower than required for the Bank to meet its 2.0% inflation target and “further downside news in the euro area had increased the risks” to the economy. The strengthening in the dovish language has seen sterling and U.K. yields decline.

The GBP/USD currency pair moved through support near the 10-day moving average at 1.6060 but paused at 1.6010.  Resistance is seen near the October highs at 1.6250. Momentum is still positive with the MACD (moving average convergence divergence) index printing in positive territory with an upward sloping trajectory.  The RSI on the other hand moved lower with price action and is printing a reading of 43, which is on the lower end of the neutral range.

Article by ForexTime

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