Today saw the end of the strong move north by the GBP from the end of January, a move bolstered by the UK Supreme Court Brexit ruling and dovish FOMC Statement.
The end of the run was dramatic and largely unpredictable in the light statement.
Governor Carney tried as hard as he could to paint a neutral picture as he could, suggesting rate’s could go “either way” and the markets seized on this and a reduced inflation forecast (2017 forecast revised down from 2.8% to 2.7%) to take the viewpoint that a rate rise was not on the table , at least not at any time soon.
However, all is not as it seems. Word is that some members of the MPC who unanimously voted for no change to the Bank Rate (0 – 0 – 9) are possibly edging to a more hawkish standpoint as there is some debate that the 2017 2.7% target might over shoot. Mark Carney seems to have misread the markets with an unnecessary rate cut post Brexit vote and the pressure could build to restore the pre June vote rate and this pressure will grow should inflation creep up.
The overall conclusion is that for now we remain BULLISH the GBP and see any pull backs as buying opportunities.
Currently we sit right on the 76.4 Fib. level from the 15th Jan to todays high.
We are LONG this market from 1.2540 with a STOP under the low at 1.2523.