GBP/USD Surges Above 1.6650 As BOE Voted 7-2 To Leave Rate Unchanged
- BOE Minutes Reveal an Interest Rate Vote of 7-2 By the MPC Members.
- GBP/USD Surge After The BOE Minutes To Trade Above 1.6650
- Looking Ahead The July’s FOMC Minutes Will Take Center Stage.
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The much anticipated Bank of England (BoE) Minutes for the month of August revealed that BOE policy makers were split on an interest rate hike. The interest rate vote (7-2) showed two MPC members (BOE’s Weale and McCafferty) were calling for a 25 basis-point rate hike in August justified by the strong economic growth in the UK. However, the majority were reluctant for a rate increase as they argue an early rise may leave the economy exposed to shocks such as putting pressure on indebted households and derail economic growth. Moreover, the majority remarked that the recent weaker-than-expected CPI prints and outlook from the UK did not justify a rate increase.
Ahead of the BOE Minutes, the British Pound fell as low as the critical 1.6600 level against the US Dollar. Immediately after the release, GBP/USD surged over 40 pips to trade above the psychologically significant 1.6650 level. Moreover, the UK 10-year Gilt yield rose 4 basis-points to 2.44 percent after the BOE Minutes. This suggest that traders are increasing their bets for the BOE to raise interest rate sooner-than-later. The emergence of MPC members siding with the more hawkish stance may be the catalyst for surge in GBP/USD says DailyFX Currency Strategist Ilya Spivak.
Looking ahead, July’s FOMC Minutes by the Federal Reserve will take center stage and is scheduled to be released at 18:00 GMT, later today. If the rhetoric from the FOMC minutes remain dovish, it may act to weigh on the greenback says DailyFX Currency Analyst David De Ferranti. For the remainder of the week, the key event risk is expected to come from China’s PMI data and Jackson Hole.
For those forex traders that endorse technical analysis, Ilya Spivak mentions near-term support rests at 1.6611 (23.6% Fib Exp.) and resistance at 1.6659 (14.6% 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, the ratio of long to short positions in the GBP/USD stands at 1.76 as 64 percent of traders are long.
GBP/USD 5 Minute Chart
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Edward Hyon, DailyFX Research Team
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