Monetary policy decision from the Bank of England at 12:00 pm BST is a key macro event of the day. The UK central bank is expected to deliver a 50 basis point rate hike, putting the main interest rate at the highest level since late-2008 (1.75%). Market prices in an 82% chance of a 50 basis point rate move and an 18% chance of a 25 basis point rate move.
BoE said at the previous meeting that it is ready to act forcefully if inflation does not show signs of easing and recent data did not show it does. A 50 basis point rate move looks warranted and market pricing reflects it. As such, market attention will be mostly focused on forward guidance. Apart from showing continued inflationary pressures, recent data from the United Kingdom also pointed to further weakness of the UK economy. There is a growing consensus that BoE will signal that pace of tightening will ease with future rate hikes being of 25 basis point magnitude, rather than 50 basis point magnitude. On top of that, BoE said in May that it will provide an update on its strategy for balance sheet run-off at the August meeting so this is also a thing to watch.
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Create account Try a demo Download mobile app Download mobile appTaking a look at GBPJPY chart, we can see that the pair bounced off the 159.70 support zone earlier this week. Pair subsequently broke above the 161.70 price zone and is now testing resistance in the 162.15 area. This price zone is marked with previous price reactions as well as 50-period moving average on the H4 interval (green line). A break above would pave the way for a test of 200-period moving average (164.20 area currently) and possibly of downward trendline as well (164.90 area currently).
Source: xStation5
