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Rumours of a UK rate rise prove unfounded

 

 

Although the BOE has real concerns about rising inflation which looks likely to hit 3% later this year the uncertainty around the full impact of Brexit has put the breaks on any potential rate rise at this time.

The BOE choose to keep the rate on hold at 0.25% with a decision of 6 in favor and 2 against. This decision was largely as expected but it does show how expectations even those based on rumors that don’t follow through can have a big impact on a currency.

In a separate unanimous decision the BOE also kept its bond purchase programs unchanged at GBP10BN (corporate) and GP435BN (government) and growth levels have been forecasted down from 1.9% to 1.7%.

GBUSD dropped to 1.3112 over the preceding 2 hours. A major support zone and trend line combined to stop it in its tracks, for now.

A clear break below 1.3112 could see price move towards the 1.3048-1.3057 support zone with sellers looking to pounce on pullbacks at 1.3150 and 1.3190.

The most likely scenario by year-end is that if inflation keeps rising and some stability starts to show on growth rates, we will see one token 0.25% rate hike.

Devising an economic policy in the aftermath of Brexit is surely giving Carney plenty of sleepless nights.

 

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