GBP/USD dips before BoE minutes
Yesterday’s worse-than-expected CPI data from the UK set the wheels in monition for the overnight decline in GBP/USD, and the Bank of England minutes today at 9.30am will keep pressure on the pound. The market is expecting no change from last month’s minutes, and all nine members are anticipated to vote in favour of keeping interest rates and the asset purchasing scheme unchanged.
As I mentioned yesterday, Mark Carney stated he would cut interest rates if he felt it was necessary, but CPI would need to be in contraction before such a move. Nonetheless, the correction that GBP/USD experienced this month was halted by soft the CPI report.
Adding to the pound’s problems is the minutes from the FOMC tonight; the US is ahead of the UK in the race to increase interest rates. Improving economic sentiment from the US will force the Fed to use more hawkish language, and this will push GBP/USD lower.
The 50-hour moving average of $1.5365 is acting as resistance, and if this level is held then $1.53 will be the target. A move above the 50-hour MA will bring the upside resistance at $1.54 into play.