Market Spotlight: GBP Fails To Rally on BOE Rate Hike

35246 market spotlight gbp fails to rally on boe rate hike

BOE Hikes As ExpectedThe Bank of England pressed ahead with its third-rate hike in just four months yesterday. Governor Andrew Bailey announced a .25% hike, well in line with market expectations, citing the need to combat soaring inflation. While there are concerns about the further pressure this will put on consumers and UK households, The BOE cited the violence in Ukraine as presenting grave upside risks for prices.Inflation Surging The BOE explained that the Russian invasion of Ukraine has led to a heavy uptick in energy prices as well as the costs of commodities and food items. Additionally, the bank noted that these effects are likely to continue for some time, adding a great deal of uncertainty to the global economic outlook.Looking ahead, the BOE now forecasts that inflation might peak around 8% this year, up from the prior 7% estimate. However, the tone of the meeting seemed to stray more into the territory of caution, perhaps explaining why GBP is a little muted today.Growth FearsThe BOE expressed its concern over the impact the current inflationary surge is having on the economy. With the elevated energy prices and supply chain issues already gripping the UK ahead of the Ukraine conflict. Looking ahead, traders seem to be sensing growth issues for the UK, as we saw in reaction to the Fed’s announcement this week. As such, the rate hike has done little to drive GBP higher here.Technical ViewsGBPUSDFor now, GBPUSD continues to hold in the bottom end of the bear channel, caught between support at 1.3031 and resistance at 1.3196. While below here, the focus is on a continuation lower. However, with momentum studies turning higher off recent lows, a break above 1.3196 will likely encourage fresh momentum for a test of the 1.3349 – 1.3461 region next.

Source: Tickmill

Related Posts