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GBPUSD Price Action Relatively Unchanged Ahead of the BoE Minutes
Written by article default Tuesday, 21 September 2010 18:26
Fundamental OutlookThe Bank of England minutes for the month of September will be released tomorrow at 8:30 GMT. Indeed, the central bank recently decided to keep their key overnight lending rate unchanged at 0.50 percent, while also maintaining its asset purchase target at 200 billion pounds. Policy member Andrew Sentence will likely continue dissenting against the majority and vote for a rate hike for the fourth consecutive month. Fueling Mr. Sentence call for a rate hike, EU raised its growth forecast for the U.K. from 1.2 percent to 1.7 percent last week, while Moody’s said that the region’s Aaa rating may withstand economic challenges yesterday. A surprised shift from another policy member may turn out to be the catalyst needed for the British pound.
Market participants will also analyze any sign of policy makers shifting closer to implementing additional quantitative easing measures to cement the recovery in the region. With Great Britain facing high uncertainty regarding economic prospects, the split amongst the committee will likely widen in the medium term. Last month, the committee expressed increased uncertainty regarding the outlook for growth and inflation as they weighed both tightening and easing regarding monetary policy. As those uncertainties gain momentum, any shift by a committee member outside of Mr. Sentance calling for a hike will validate further gains in the GBPUSD. However, a dovish statement may lead the pair to retest the 200-day moving average.
Technical Outlook
GBPUSD Daily Chart
GBPUSD: After breaking above its tight narrow range, the pair had rallied to its highest level since August 11th before reversing course. As of late, the pair extended yesterday’s decline during the overnight trade, but has managed to pare its losses and sit slightly above the 10-day moving average. Nonetheless, my user defined Parabolic SAR has yet to shift directions, thus, upside risks still remain.
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