BoE to hike rates earlier?

Ian McCafferty, MPC member, stated on Monday that it’s likely borrowing costs will rise earlier than previously thought. Main reasons cited for an earlier rate hike were that growth “is holding up” and inflation is “significantly above the target”. We see the case however that the rate hike path for the BoE, may be influenced by the progress of the Brexit negotiations. Currently the market seems to price in the probability for the next rate hike in early August according to GBPOIS. The UK CPI rate which is expected to be released today could play a decisive role as to the markets expectations. Overall, we see the case for the GBP to strengthen in the short term, as market expectations may grow.

Cable moved in a sideways manner yesterday between the 1.3750 support line and the 1.4040 resistance line. We see the case for the pair to continue to trade in a sideways manner however it may gain momentum and have some bullish tendencies, subject to the release of the UK financial data today. Should the pair find buying interest, it could break the downward trend line incepted since the 2nd of February and reach the 1.4040 resistance line. Should the pair find selling orders, it could break the 1.3750 support line and aim for the 1.3590 support zone.

Worries for stock markets fade away

The three major indexes of Wall Street rebounded on Monday, indicative of investors regaining at least some confidence in the stock market. Analysts considered the “weekend” effect as the market had a calmer review of the market, gaining faith in a strong economy. The release of US government budget, including infrastructure spending temporarily helped sectors such as materials and industrials. We see the case for the CPI data release tomorrow to play a major role on further stabilization of the market. Overall, it could be the case that the US Dollar may weaken in the short term as further confidence is added to the stock market.

EUR/USD moved in a sideways manner yesterday, between the 1.2230 support line and the 1.2355 resistance line. We see the case for the pair to trade in a bullish mood in the short term. The arguments strengthening the case for a bullish mood could be the reaching of the 200 moving average in the 1 hour chart as well as a strong RSI reading. Should the bulls take the driver’s seat, the pair could break the 1.2355 resistance line and aim for the 1.2455 resistance hurdle. Should the bears take the reins, we could see the pair breaking the 1.2230 support line and aim for the 1.2100 support barrier.

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