The British pound is unchanged on Thursday. In the European session, GBP/USD is trading at 1.3957, down 0.01% on the day.
Will BoE send out a hawkish message?
All eyes are on the Bank of England, which will set the key interest rate later in the day. With the economy reopening, investors are carefully watching for any hints from the bank about a tightening in policy earlier than expected. Economic indicators, such as the May PMIs, indicate that the recovery continues to gain traction. As well, inflation has been increasing, and the markets were all abuzz when US inflation surged. UK inflation rose to 2.1%, which is noteworthy because it breached above the BoE’s inflation target of 2.0%. We can expect the bank to address higher inflation at today’s meeting. At the same time, Covid has resurged in the UK, to the extent that the much-anticipated Freedom Day, scheduled for June 21, has been delayed for four weeks.
The BoE is unlikely to announce a dramatic shift in its policy, with expectations that it will maintain the bank rate at 0.1% and QE at 895 billion pounds. If BoE Chief Economist Andy Haldane others dissent in favor of a reduction in QE, this could give the pound a lift. As well, a hawkish-sounding statement could push sterling above the symbolic 1.40 level. The pound crossed above this line on Wednesday but was unable to hold and retreated.
On Wednesday, UK PMI reports for May were positive, pointing to prolonged growth in the manufacturing and services sectors. The Manufacturing PMI came in at 64.2 and the Services PMI at 61.7 points.
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GBP/USD Technical Analysis
- There is resistance at 1.4024. Above, there is resistance at 1.4249
- On the downside, 1.3929 is the first level of support. This is followed by a monthly support line of 1.3648
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/