The pound hopes for optimism
#GBPUSD
Key zone: 1.3250 - 1.3400
Buy: 1.3400 (after a retest of 1.33) ; target 1.3550-1.3600; StopLoss 1.3320
Sell: 1.3200 (on strong negative fundamentals); target 1.3000; StopLoss 1.3280
The scenario in which the BOE lowers the interest rate by 25 basis points today is considered the most likely and has already been priced in. But that doesn’t mean the reaction can be ignored.
The main intrigue lies in determining the further pace of easing British monetary policy — no clarity here. Bailey himself may voice positive factors like the slowdown in UK economic growth. On the other hand, the BOE could take a more cautious stance, pointing to rising inflation.
Second-quarter data won’t be released until next week (August 14), so policymakers will have to rely on monthly indicators — which leave much to be desired.
Key current dynamics:
• UK headline CPI accelerated to 3.6% y/y — the fastest growth since January last year.
• Core CPI (excluding energy and food) also accelerated to 3.7% y/y.
• Retail price index rose to 4.4% y/y, despite forecasts for a slowdown to 4.2%.
Note — inflationary pressure in the UK is persistent, not transitory. For instance, core inflation in services (rent, insurance, healthcare, education) stands at 4.7%. Inflation is accelerating against the backdrop of slowing macro indicators.
Labor market isn’t optimistic either:
• UK unemployment rose to 4.7% (a 4-year high);
• wage growth slowed again — both nominal and real;
• excluding bonuses, wage growth dropped to 5.0%.
GDP has been contracting for the second consecutive month, signaling a slowdown in Q2, especially in manufacturing and construction.
The situation is further complicated by UK Treasury’s fiscal policy: in autumn, Rachel Reeves will announce tax hikes to meet budget goals.
So it’s possible that the BOE pessimists will vote to hold rates. If the rate cut is approved unanimously, the pound will come under pressure.
We believe the regulator will cut the rate, but the statement and Bailey’s comments will be overly cautious and vague. This may provide temporary support for GBP/USD — but not for long.
So we act wisely and avoid unnecessary risks.
Profits to y’all!
