GBP/USD Plunged As BoE Voted 7-2 And Raised Concerns For Global Outlook
- BOE Minutes Reveal an Interest Rate Vote of 7-2 By the MPC Members.
- GBP/USD Plunged After The BOE Minutes To Trade At A Session Low Below 1.6100.
- Looking Ahead October’s US CPI Figures Will Take Center Stage.
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The Bank of England Minutes from October’s policy meeting revealed that BoE committee voted 7 -2 for a hold interest rate decision, which is at 0.5 percent. The BoE’s Weale and Mccafferty, the minority, voted for a 25 basis-point rate increase in October’s policy meeting as they see potential risk of wage growth to pick up sharply. They further alluded to record-low interest rate causing an unbalanced recovery in the UK. However, the majority saw weaker Eurozone and the global economic outlook to have deteriorated, slowing export growth. Thus, rate hike may act as a hindrance for the UK economy.
Ahead of BoE Minutes, the British Pound lost ground against the US Dollar as broke below 1.6100 level. It hit a session low of 1.6070. After the release of BoE Minutes, GBP/USD plunged to 1.6039 as majority MPC members showed reluctance to raise rates amid concerns in the Eurozone and the rest of world. This was reflected in the bond market as UK 10-year Gilt fell 2 basis-points at 2.15 percent.
Preceding ahead, attention will shift to USD Consumer Price Index for the month of September, which will cross the wires at 12:30 GMT later today. The core inflation data is expected to remain the same as the prior month’s reading of 1.7 percent, while the year-on-year CPI figure is expected to edge slightly lower to 1.6 percent from 1.7 percent. Moreover, both gauge for inflation remain below the Federal Reserve’s price-growth target of 2 percent, which may mean low rates for longer. This will potentially bode-ill for the US Dollar as it recently surged due to the anticipation of the Fed transitioning to normalize rates. However, DailyFX Currency Strategist Ilya Spivak mentions of a possible upside surprise, if CPI reading is better-than-expected, which could help rekindle 2015 Fed rate hike expectations and boost the US Dollar.
For those Forex traders that respects technical analysis, Ilya Spivak mentions near-term support to rest at 1.6066 (14.6% Fib Ret.) and resistance at 1.6184 (23.6% Fib Ret.). He remains on the sidelines and wait to see how positioning evolves in the hours ahead of the BoE Minutes before committing to a trade. Meanwhile, according to DailyFX Speculative Sentiment Index, the ratio of long to short positions in the GBP/USD stands at 1.04 as 51 percent of FXCM retail traders are long.
GBP/USD 5 Minute Chart
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Edward Hyon, DailyFX Research Team
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