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BoE Minutes Rattle British Pound - Putting Price in Perspective

BoE Minutes Rattle British Pound - Putting Price in Perspective

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- Bank of England unanimous in policy hold; 7.0% Unemployment Rate doesn’t guarantee interest rate hike.

- British Pound initially lower, but steadies and rebounds after BoE Minutes.

- Expect action in both GBPJPY and GBPUSD later today.

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INTRADAY PERFORMANCE UPDATE: 10:45 GMT

MAJORS

AUD

CAD

CHF

EUR

GBP

JPY

NZD

(vs USD)

-0.33%

+0.07%

+0.25%

-0.07%

+0.21%

+0.20%

-0.35%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.08% (-0.20% prior 5-days)

ASIA/EUROPE FOREX NEWS WRAP

Weakness in the commodity currencies coupled with strength in the safe havens sees markets around the globe favoring lower yielding, safer assets on Wednesday. The G10 currencies are little changed around the US Dollar overall, with the British Pound the notable outperformer after this morning’s release of the Bank of England’s November meeting Minutes.

British Pound strength wasn’t directly apparent after the BoE Minutes were released, as language within differentiated itself moderately from rhetoric employed just last week. Whereas in the Quarterly Inflation Report the BoE moved up its projection for the Unemployment Rate to hit 7.0% in the 3Q’15 rather than the 3Q’16 (a hawkish policy implication – policy will tighten sooner than anticipated).

Today’s Minutes show that a rate hike isn’t guaranteed once the labor market threshold is hit (a dovish implication – rates will remain lower for longer). Expectedly, the British Pound was unnerved by the more dovish tone employed, and saw brief downside in the wake of the release.

Yet with price recovering soon after across the GBP-crosses spectrum, it’s evident that underlying British Pound strength remains. If further strength for the Sterling is to materialize, it may occur against the Euro and the Japanese Yen in the near-term:

EURGBP Daily Chart: July 3, 2012 to Present

BoE_Minutes_Rattle_British_Pound_-_Putting_Price_in_Perspective_body_Picture_1.png, BoE Minutes Rattle British Pound - Putting Price in Perspective

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- The EURGBP has set a lower high after breaking the uptrend from July 2012 (ascending black TL), and price has pierced sideways channel support (grey channel, dating back to January 2013).

- A new descending channel may be emerging (red channel); confirmation below 0.8300.

- Weekly close <0.8300 suggests move into 0.8175/0.8225 by year end.

GBPJPY H4 Chart: September 11, 2013 to Present

BoE_Minutes_Rattle_British_Pound_-_Putting_Price_in_Perspective_body_x0000_i1028.png, BoE Minutes Rattle British Pound - Putting Price in Perspective

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- The GBPJPY remains supported by an uptrend dating back to November 2012, and a more concerted uptrend since April 2013.

- Price has broken out in an ascending triangle since September above 159.75/160.00.

- After breakout last week, on H4 price has consolidated into a potential Bull Flag (context of the bullish breakout).

- H4 close >162.00 gives confidence for continuation into 162.75 and 164.20 over the coming weeks.

Read more: Euro Shrugs Off Rate Cut, Needs Resilient PMIs for Boost Higher

ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION

BoE_Minutes_Rattle_British_Pound_-_Putting_Price_in_Perspective_body_x0000_i1029.png, BoE Minutes Rattle British Pound - Putting Price in Perspective

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.

--- Written by Christopher Vecchio, Currency Analyst

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

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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