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Sterling Top Developing Alongside Euro after BoE: GBP/JPY, GBP/USD

By , Currency Strategist
14 May 2014 11:30 GMT

Talking Points:

- GBPUSD working on back-to-back weekly inverted hammers.

- GBPJPY loses uptrend dating back to November 2012.

- GBPAUD head & shoulders topping continues below 1.7750.

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The Bank of England has lowered its inflation forecasts marginally for the next three years (2014-2016), and as a result the market has interpreted the shift in tone as a signal that the first rate hike away from the all-time low of 0.50% is still well-off into the future. Citing excess slack in the economy (with about 1-1.5% still remaining), there is still room for the economy to grow before a tightening of monetary policy is required.

The backdrop of weaker expected inflation allows the BoE to keep interest rates lower for longer, and as a result the British Pound is under pressure across the board, posting all-too-similar patterns versus the Australian Dollar, the Japanese Yen, and the US Dollar - it's very possible that the entire European currency complex is seeing a sea change at the moment.

Watch the video for a discussion on GBPAUD, GBPJPY, and GPBUSD, and click the link below for a look at various EUR-crosses.

Read more: EUR/JPY, EUR/USD Bearish Key Reversals Begins Continuation Lower

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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14 May 2014 11:30 GMT