BoE meeting looms as markets digest FOMC

The British pound has reversed directions on Thursday and is in positive territory. GBP/USD is currently trading at 1.3672, up 0.41% on the day.

BoE likely to maintain course

The BoE finds itself in a delicate position, as recent economic data shows the recovery stumbling, while inflation remains well above target. Just ahead of the meeting, Manufacturing PMI for August slowed to 56.3, down from 60.3. The BoE began tapering its QE programme in May, but the timing of a rate hike remains unclear. ING noted that the financial markets expect the BoE to raise rates in Q2 of 2022, but it does not expect a hike until the end of next year. The BoE is unlikely to provide much insight into rate policy at today’s meeting, but investors will be interested to see if the Bank continues to insist that the recent spike in inflation is transient.

At the FOMC policy meeting on Wednesday, policy makers signalled to the markets that the Fed was prepared to commence tapering by the end of the year. However, no commitments were made, as Fed members said in the rate statement that if progress continues as expected, “a moderation in the pace of asset purchases may soon be warranted.” Fed Chair Powell added in follow-up comments that the Fed “could easily move ahead at the next meeting, or not, depending on whether those tests are met.”  Powell helpfully circled the two key areas that the Fed is monitoring ahead of a taper –  inflation is running well above the Fed target of 2%, while unemployment, which has dropped to 5.2%, still has some ways to go before reaching the Fed goal.

The Fed’s dot plot indicated a slightly more hawkish stance, as nine members now project a rate hike in 2022, up from seven members previously. The Fed is being cautious with regard to rate hikes, showing they are in no rush to hike even as a taper looks imminent.

.

GBP/USD Technical Analysis

• There are resistance lines at 1.3851 and 1.3975
• The pair continues to test support at 1.3666. Below, there is support at 1.3605

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.