BoE stands pat but GBP jumps

BoE kept it’s interest rate stable at +0.50% as was widely expected by the market. The minutes had a hawkish tone. Specifically they projected a need for a tightening to occur “somewhat earlier and by a somewhat greater extent” as until now anticipated. The quarterly inflation report projects inflation to drop to +2.28% in one year time from current +3.0% and GDP to grow by +1.8% for 2018 instead of +1.6% which was the previous forecast. BoE Governor, Mark Carney justified the tone of the minutes as global economic growth is stronger and at the same time mentioned that future interest rate hikes will be gradual. Analysts predict that the next rate hike may come as early as May 2018. Overall GBP has strengthened and there seems to be a positive sentiment for it.

Cable rose sharply yesterday upon BoE’s decision announcement and tested the 1.4040 resistance level, only to surrender most of its gains later on. We see the case for cable to continue to trade in a bullish mood for the short term, however contingent to today’s UK financial data release. Should the pair find buying orders, we could see it breaking the 1.4040 resistance line and aim for the 1.4168 resistance level. Should the pair come under selling interest, we could see the pair breaking the 1.3875 support level and aim for the 1.3749 support zone.