GBP/USD – Dollar Higher as BoE Minutes Show Split Over Rate Hike

The pound continues to lose ground on Wednesday, as GBP/USD trades in the mid-1.60 range in the North American session. On the release front, the BoE minutes pointed to dissension amongst policymakers regarding a rate hike, with a minority voting in favor of raising rates. In the US, inflation indicators were weak, as Core CPI and CPI both posted a small gain of 0.1%.

The BoE released the minutes of its last policy meeting, in which the central bank maintained interest rates at 0.50%. The minutes pointed to dissension among the board members, as the vote was 7-2 in favor of holding rates, with the minority arguing in favor of a hike to 0.75%. The release comes on the heels of remarks on Friday by BoE chief economist Andrew Haldane, who said that he was in against raising rates due to concerns about weak domestic and global growth. The vote to maintain QE at 375 billion was unanimous (9-0).

US numbers have generally been strong, but very low inflation levels continue to point to slack in the economy. On Wednesday, this trend continued with soft consumer inflation numbers. CPI rose to +0.1%, an improvement from the previous reading of -0.2%. The estimate stood at 0.0%, so the markets clearly did not have high expectations. It was a similar story from Core CPI, which also posted a 0.1%, up from 0.0% a month earlier. This was shy of the forecast of 0.2% but still within expectations.

GBP/USD for Wednesday, October 22, 2014

GBP/USD October 22 at 14:10 GMT

GBP/USD 1.6074 H: 1.6131 L: 1.6012

GBP/USD Technical

• GBP/USD posted sharp drops in the Asian and European sessions, coming close to the support line of 1.60. The pair has partially recovered, with gains in North American trade.
• The round number of 1.6000 weakened as the pair lost ground before rebounding higher.
• 1.6141 is the next line of resistance.
• Current range: 1.6000 to 1.6141

Further levels in both directions:

• Below: 1.6000, 1.5864, 1.5717, 1.5644 and 1.5460
• Above 1.6141, 1.6263, 1.6382 and 1.6484

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Wednesday, continuing the trend seen a day earlier. This is consistent with the pair’s movement, as the pound has posted slight losses. The ratio has a slight majority of long positions, indicative of trader bias towards the pound reversing direction and moving upwards.

GBP/USD Fundamentals

• 8:30 MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9.
• 8:30 MPC Official Bank Rate Votes. Estimate 2-0-7. Actual 2-0-7.
• 19:00 MPC Member Martin Weale Speaks.
• 12:30 US CPI. Estimate 0.0%. Actual 0.1%.
• 12:30 US Core CPI. Estimate 0.2%. Actual 0.1%.
• 14:30 US Crude Oil Inventories. Estimate 2.8M. Actual 7.1M.

* Key releases are in highlighted bold.

*All release times are GMT

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