BoE hikes, but pound drops on dovish comments

BoE hiked rates as expected yesterday reaching the +0.75% level, in a surprise unanimous 9-0 vote. The hike temporarily strengthened the pound and especially the 9-0 vote count, as it showed the bank’s decisiveness for the rate hike. However, in the press conference later, dovish comments made by BoE governor Carney weakened the sterling substantially. The comments included remarks such as that the monetary policy would need to walk not run and the repercussions of a hard Brexit. The pound may continue to ride a bearish wave today, at the aftermath of the comments made and as the Services PMI for July is forecasted to drop to 54.7 compared to previous reading of 55.1.

Cable dropped yesterday breaking consecutively the 1.3090 and the 1.3035 support lines and stabilized later on. We could see the pair continue to trade in a bearish market as the USD side of the pair could be supported by the release of the US employment report. Should the bears continue to rule the pair’s direction we could see it aiming if not breaking the 1.2960 support line. Should the bulls be in the driver’s seat we could see the pair breaking the 1.3035 resistance line and aim the 1.3090 resistance hurdle.

Other economic highlights for the rest of the week

In the European session we get Germany’s preliminary HICP rate for July, while in the American session we get the US Pending Home Sales growth rate for June.

On Tuesday, France’s and Euro-zone’s CPI preliminary rates for July are due out.

On Wednesday, we get the US ISM Mfg PMI for July and FOMC’s interest rate decision.

On Thursday, the much awaited BoE interest rate decision will be released and could significantly move the market.

On Friday, market focus may shift to the US employment report with its NFP figure and to a lesser extent the UK Services PMI, both for July.

Other economic highlights for today (7/27/2018)

In the American session from the US we get the preliminary GDP growth rate for Q2, which is forecasted to accelerate substantially and could provide some support for the USD.

Also, we get the US Core PCE prices for Q2, the final release of the Michigan Consumer Sentiment indicator for July and the Baker Hughes Oil Rig Count figure.

Also we would like to point out that Bitcoin dropped yesterday probably on the news that a US Bitcoin ETF was rejected by the Securities and Exchange Committee.