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GBP Sinks As Bank of England Stands Pat

FOREX
  • The BOE disappointed the markets by keeping rates on hold at their November meeting. GBP came under immediate selling pressure, which extended throughout the majority of Thursday's trading session.
  • GBPUSD actually spiked around 25 pips to 1.3650 prior to the announcement amid thin liquidity, however, the 7-2 vote in favour of rates on hold sparked a rapid 100 point move lower to 1.3550.
  • Consistent selling ensued throughout the press conference and the rest of Thursday as technical conditions deteriorated, both in cable and in the crosses.
  • EURGBP (+0.90%) rose above short term resistance, extending the most recent recovery back above 0.8500 to close on a Fibonacci retracement level around 0.8561. A buoyant yen saw GBPJPY plummet 1.65%, encountering the 50-day moving average for the first time since October 7.
  • Prior to the BOE, the greenback had a strong recovery post the FOMC weakness late on Wednesday. The dollar index rose to a 3-week high, helped by EURUSD completing a near 100-pip turnaround to trade within a few pips of the 2021 lows residing at 1.1524.
  • Dollar gains were broad based but focused against more risky currencies such as AUD (-0.65%), NZD (-0.75%) and CAD (-0.58%) with mixed and more modest performance against both the JPY and CHF.
  • The latter half of Thursday saw much more contained ranges as market participants paused for breath between the recent event risk and tomorrow's NFP data. Ahead of the US and Canadian employment reports, the RBA will release their Monetary Policy Statement.
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