Further rate hikes are expected following today’s BOE Governor M Carney’s press conference after the BOE meeting, while the GBP remains offered.
The GBP starts the afternoon with a massive sell-off, which has pushed GBPUSD in the low area in sub – 1.3112 levels on Thursday.
Cable remains defensive as the UK 10-year yields dip below 1.29%, hitting 2-week lows.
MPC members voted 7-2 in favour of further rate hikes, while the vote for the asset purchase facility to remain unchanged was unanimous. Policymakers decided to keep the bond-buying programme at £435 billion.
BOE experts see the UK’s inflation on the rise, going up by 3% in October 2017. At the same time, the general sentiment among MPC members regarding rate hikes was positive, despite member Cunliffe and Ramsden voting against further rate increases.
At the press conference that followed the BOE meeting, Governor Carney highlighted that the Brexit poses major risks for the UK’s economic growth. He also added that the country’s economic growth is slower but not subdued as some suggested. Furthermore, today’s decision on increasing the interest rates by 25 bps aims to prevent the inflation squeezing pressure on income.
BOE’s governor also suggested that gradual rate increases would potentially and should push inflation back within the following months.
The current rate hike is the first in 10 years’ time. Carney also pointed out that UK policymakers are ready to re-evaluate the economic outlook, should the steps regarding the Brexit be clear.
GBPUSD in Focus
Traders should be mindful about the GBPUSD resistance and support levels for the day. The pair seems to lose around 1%, approaching 1.3113 levels and heading towards the next support level. A breakout around 1.3299 would potentially aim for 1.3338 (October 13 high) and then falling into resistance is to be expected.