BOE Up Next

The Bank of England meeting today will be pivotal for GBP.  Concerns over the UK economy have become a prominent issue in recent months with widening industrial action, ongoing Brexit-related difficulties, covid disruptions and political instability all exerting downward pressure on GBP. The BOE’s tightening operations have added to the pressure for UK households and businesses gripped by the cost-of-living crisis which is set to intensify for many with today's expected .5% rate-hike.

Inflation & Economy in Focus

With UK inflation still at elevated levels it is too early to look for the BOE to pivot. With that in mind, the market is widely expecting a further .5% hike today. However, it will be the bank’s forward guidance that garners the most attention. The BOE has recently signalled a desire to bring tightening to an end rates markets have started to price in the chance of a cut into the end of the year, in line with forecasts for a UK recession across the second half of the year.

Fresh Forecasts

A new set of economic forecasts will be issued today. Traders will therefore get a detailed look at the bank’s latest inflation forecast. If this has moved meaningfully lower since last time, this is likely to further endorse expectations of a cut down the line, particularly if growth forecasts are lower also, leading GBP lower near-term. The voting split will also be closely watched, if more members are seen voting against a hike, this should open the way for further GBP downside also.

Technical Views

EURGBP

The rally in EURGBP on the back of yesterday’s post-FOMC move has seen the market testing above the .8597 - .8869 range for the first time in Sep 2022. While above here, and with momentum studies bullish, the focus is on a continuation higher. If today’s ECB meeting proves EUR bullish and the BOE meeting proves GBP bearish, the stage is set for further gains towards the .9276 level longer-term.