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Focus Switches to BOE After Dovish FOMC

GBP
MNI (London)
  • Dovish FOMC saw the USD come under general sell pressure Wednesday, the USD sales allowing GBP/USD to bounce off its pre announcement low of $1.3851 to $1.3971 ahead of the close.
  • Recovery extended in early Asia to $1.3978 before Tokyo influenced it back to $1.3936 before it met fresh demand which bounced back to retest the early high, extending the top to $1.3979 ahead of the Europe open.
  • Focus now switches to the BOE MPC monetary policy announcement at 1200GMT.
  • MNI View: Thursday's Bank of England MPC meeting will be a tug of war between a generally better economic outlook and tighter financial conditions. No headline changes are expected to rates or the stock of QE, but the pace of purchases will be watched.
  • The MNI Markets team thinks that the MPC will acknowledge the better outlook but state discomfort with the pace of rate hikes priced into markets.
  • Most analysts expect a balanced statement noting the improved economic outlook, stimulus from the Budget and encouraging vaccine progress and expect this will be enough to stop the Bank pushing back too hard against the rise in yields.
  • Expect resistance into $1.4000, ahead of $1.4005/08(Mar12 high/50% 1.4237-1.3779) then $1.4017(Mar04 high). Break here to open potential toward $1.4050.
  • Support $1.3936 ahead of $1.3900 then $1.3850.
  • EUR/GBP back holding around its key 10-dma leaves GBP/USD to track EUR/USD moves.
  • MNI Techs: GBPUSD traded higher yesterday but remains below resistance at 1.4005, Mar 12 high. Attention is on support at 1.3779, Mar 5 low ahead of a key bull channel support that intersects at 1.3787. The channel is drawn off the Nov 2, 2020 low and a clear break of both levels would represent an important short-term reversal. This would open the 1.3600 handle and below. For bulls, a break of 1.4005 would signal scope for stronger gains.
MNI London Bureau | +44 203-586-2231 | john.webb@marketnews.com
BulletMarketsForeign Exchange Bullets
MNI London Bureau | +44 203-586-2231 | john.webb@marketnews.com
BulletMarketsForeign Exchange Bullets

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