The GBPUSD pair is recording slight declines on an intraday basis, which with its range is approaching the barrier set by the 50% Fibo retracement of the downward wave initiated in July 2023. A little after 09:00 a.m., a press conference began with BoE MP Dave Ramsdey, who commented on the current UK macroeconomic backdrop. Here are the banker's key comments:
- Monetary policy will constrain growth
- In 2023, the British economy will be more resilient than forecast.
- Monetary policy will constrain growth
- UK productivity growth and labor supply are weak
- There are signs that the unemployment rate has increased
- Inflation in the UK has become more domestic
- Tackling services inflation is a challenge
- Services pose the greatest sustainability risk
- Interest rates will remain restrictive for a long time
- I see the risk of rising inflation
- We are not making commitments on the level of interest rates
- The path of rates will depend on the data
Overall, the tone of the statement was mixed. On the one hand, the banker sees signs that the economy is cooling down, but in the background all the time the inflationary forces (services) are strongly influencing the market, which are harder to tame.
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Open account Try demo Download mobile app Download mobile appBut what does this mean for the British pound? For the GBPUSD pair, the key long-term trend-creating factor on this cross may be the prediction of the possible dynamics of interest rate cuts in 2024. At this point, the money market assumes that the process will move much faster in the US. By November 2024, the BoE is expected to cut rates by a total of just over 50 basis points, according to market valuations. In the case of the Federal Reserve, there could be almost 3 such cuts in the same time period (by a total of 75 basis points).
The current level of BoE interest rates is 5.25%. Source: Bloomberg Financial LP
The Fed's current interest rate level is a range between 5.25%-5.50%. Source: Bloomberg Financial LP
Chart of the GBPUSD currency pair, D1 interval. Today's session brings a retest of the support zone defined by the previously broken 50% Fibo retracement barrier. In the event of defence of this support and a possible upward breakout, the next level to watch may be the zone around 1.27. The main support level in the event of a downward breakout may be the barrier around 1.25-1.24 (the Fibo measure of the downward wave from July 2023 and the upward wave initiated in September 2022. Source: xStation
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