GBPUSD Jumps After Hawkish BOE Meeting
Hawkish Hold From BOE
GBPUSD is trading higher today, extending the rally from yesterday where some hawkish details in the April BOE meeting helped drive the Pound higher. A weaker US Dollar on the back of suspected BOJ intervention in FX markets yesterday is also helping lift the pair with price now testing above the April highs.
Energy Price Shock
On the BOE front, the bank held rates steady yesterday as expected but warned that rates could need to rise if inflationary pressures from the Iran war don’t subside. BOE governor Bailey warned that the UK economy was dealing with a ‘significant energy price shock’, reflected in the latest UK inflation data which saw headline annualised CPI rise to 3.3% last month.
Inflation Higher for Longer
Looking ahead, the BOE outlined three possible scenarios, two of which see inflation remaining higher for longer. The bank assigned no probabilities to the three scenarios, saying it will simply deal with developments as they occur. With inflation above target and expected to continue higher near-term, the prospect of a June hike looks more likely. Indeed, if oil prices continue to hold above $100 p/b (driven by inertia in US/Iran peace talks), inflation risks will remain entrenched, putting greater pressure on the BOE as we move through the summer months.
Technical Views
GBPUSD
The rally has seen GBPUSD pushing higher off the 1.3446 level with price now testing above the April highs. With momentum studies bullish, focus is on a continuation up towards the 1.3774 level next. Only a break sub 1.3446 will negate the near-term bullish view.
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