The British pound rose against the dollar on Wednesday after UK inflation data reinforced market expectations that the Bank of England BOE will keep interest rates steady on Thursday, in contrast to the anticipated start of the U.S. policy easing cycle later in the day. Sterling gained 0.49%, reaching a session high of $1.3227, recovering from Tuesday’s losses.
The currency also hit a fresh 30-month high on Wednesday, nearing the 1.3300 level after the U.S. Federal Reserve (Fed) cut interest rates by a substantial 50 basis points, marking the Fed’s first rate cut in over four years.
The Bank of England is set to announce its own September rate decision on Thursday. However, no rate moves are expected from the BoE, as it already lowered its benchmark rate earlier this summer.
Later today, The Bank of England is widely anticipated to keep interest rates at 5% in a seven-to-two vote. The BoE’s Monetary Policy Committee (MPC) previously voted five-to-four to reduce interest rates by 25 bps from 5.25%, and markets are expecting the BoE to hold steady for this meeting.
Meanwhile, industry data showed British supermarket sales growth slowed over the last month as consumers trimmed spending after their summer holidays.
Looking through the Bank of England’s range of underlying services measures, we still see some marginal improvement in the data despite the uptick in the headline services measure, with underlying inflation continuing to ease
Looking past the MPC decision on Thursday, markets are wagering on 50 basis points of cuts in total from now until the end of the year. The BoE cut rates by a quarter of a point last month.
Now, today move will be depend on the BOE decision a rate cut is expect to put pressure or a vice versa.
Technical Outlook – BOE Critical Focus
The GBP/INR pair retreated from the high of 110.64 and settled at 110.20 yesterday, compared to the previous day’s close of 110.29.
For the past four days, the pair has been consolidating above 110.10 and trading above the short-term moving averages. This indicates that the pair is struggling to maintain support at 110.00 but is trying to sustain above it.
The momentum is expected to remain positive unless it closes below this level, and the pair is likely to test the immediate resistance at 110.45-110.62 in the coming days.
On the downside, a break below 109.85 could open the door for a move towards 109.62-109.55.
Overall, momentum will depend on the Bank of England’s policy decision. An unchanged decision is expected to support gains, while a rate cut could add pressure.
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Commodity Samachar Securities
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Also Read: Economic News: Bank of England policy decision in Focus now “Fed Cuts Rates: Nifty Set to Soar to New Heights!”
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