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BOE Chief Rebuffs Hawkish Expectations
Despite hawkish expectations having increased recently, linked to persistent strength in inflation, GBP bulls were disappointed yesterday as BOE governor Mark Carney poured cold water on the idea of a hike. Speaking during the rescheduled Mansion House speech, the BOE governor said that now is not the time to be tightening monetary policy in the UK. Referring to the health of the economy, Carney said that domestic inflationary pressures remain subdued with consumer spending mixed and wage growth anemic. Carney said that he wants to see the economy’s reaction to Brexit and to see whether wages strengthen.
At the recent BOE meeting, three members of the MPC dissented and voted in favour of a hike, seeing GBP firmly bid across the board. However, news this week that the person replacing Kristin Forbes, one of the dissenting voters, is a known dove, fueled a reversal in GBP.
Technical Perspective
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GBP/USD remains in a bull flag pattern within the medium term bullish channel, running since the 2016 lows. While the rising channel support remains intact, the focus remains on the further upside. A break of the channel support would open the way for a test of deeper structural support at the 1.2416 level.
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EUR/GBP remains toward the upper end of the broad .83 – .8850s range that has framed price action since November last year. Though rejected at its recent test of the level, price looks set to challenge the .8850s high again soon, opening the way for a run up to test the 2016 high a few figures above. Only a break back below the recent .8650s swing low would alleviate the near-term bullish bias for the pair.
RBA Meeting Minutes Recap
Overnight we had the release of the RBA meeting minutes from the recent June meeting. The minutes come in the wake of the May employment report which saw a strong uptick in labour market conditions, vindicating the bank’s comment that firmness in forward indicators suggests a “gradual erosion of the spare capacity in the labour marketâ€.
