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GBP/USD Sinks Below 1.7075 As BOE Voted 9-0 To Leave Rate Unchanged

GBP/USD Sinks Below 1.7075 As BOE Voted 9-0 To Leave Rate Unchanged

2014-07-23 09:08:00
Edward Hyon,
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Talking Point:

  • BOE Minutes Reveal an Interest Rate Vote of 9-0 By the MPC Members.
  • UK BBA Loans for House Purchase (Jun): 43265 Actual Vs 41375 Estimated; 41757 Prior,
  • GBP/USD Sinks after The BOE Minutes To Trade Below 1.7075; Erased Earlier Gains.

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The eagerly awaited Bank of England (BOE) Minutes for the month of July may have disappointed those traders expecting a more hawkish tone from the BOE. The interest-rate vote (9-0) showed no MPC members were for an interest rate hike. Moreover, the BOE states that they have no preset timing for first rate increases. However, the minutes did reveal that some MPC members saw “receding risks” from rate rises “derailing” the economic recovery.

The minutes were highly anticipated due to the BOE Governor Mark Carney sending out mixed signals in recent weeks. He has gone from saying “the markets were underpricing the possibility of an interest rate hike this year” at the Mansion House on June 12 to saying “there is more spare capacity to be absorbed than previously thought before any rate hike is considered,” days later.

The Central Bank Chief has also indicated that the exact timing of the first rate hike, since March 2009, would be “data driven and dependent on the progress of the economy.” It seems on the backdrop of a sole UK CPI print above prior readings, the case for a near-term tightening by BOE seems flimsy says DailyFX Currency Strategist Ilya Spivak. The UK Loans for House Purchase data for the month of June crossed the wires at 43,265 versus 41,881 from the prior month. This print exceeded market expectations.

Ahead of the BOE Minutes, the Pound grinded higher against the greenback to trade near 1.7100 level. After the release, GBP/USD sank to trim its earlier gains to break below 1.7075.

From a technical dimension, Ilya Spivak mentions near-term support rests at 1.7048 (14.6% Fib. Ret.) and resistance at 1.7139-53 (23.6% Fib. Exp.). He remains flat for now as he argues against entering short with prices trading in close proximity to support level and there is an absence of a defined bullish reversal signal. Meanwhile according to DailyFX Speculative Sentiment Index, 83 percent of retail Forex traders are short the GBP/USD.

GBP/USD 5 Minute Chart

GBP/USD Sinks Below 1.7075 As BOE Voted 9-0 To Leave Rate Unchanged

Daily Chart - Created Using FXCM Marketscope 2.0, Volume Indicator Available Here

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Edward Hyon, DailyFX Research Team

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