Yahoo Finance Sterling Lower Ahead of BoE Super Thursday, Dollar Rallies
The story defining the Pound’s steep depreciation in recent days continues to revolve around Brexit-related uncertainty and a broadly stronger US Dollar.
Much attention will be directed towards the Bank of England policy meeting which should offer fresh insight into the health of the UK economy. It’s widely expected that UK interest rates will probably be left unchanged today, attention will be directed towards the language of the policy statement, inflation forecast and whether there is split in the MPC vote.
The Sterling still appears heavily depressed but could be thrown a lifeline, if the BoE hints a rate hike in 2019 on the condition a soft Brexit or no Brexit at all. Alternatively, buying sentiment towards the Pound is seen taking a major hit if the central bank rules out a hike this year due to the endless uncertainty created by Brexit.
What would be seen as a major threat to the Sterling resuming its painful descent would be if the BoE issues a downbeat policy statement, suggesting a downward revision in growth and inflation forecasts which obstruct the need to raise rates.
Away from the BoE meeting, Theresa May will be flying to Brussels today on a mission to secure further concessions from the EU. With the European Union already making it clear that the withdrawal agreement is “not open for re-negotiations”, it will be interesting to see how her trip plays out. The Pound is seen weakening if she returns back to London empty-handed. However, a rebound could in the cards if expectations start to mount over the government extending Article 50.
Taking a look at the technical picture, the GPUSD is bearish on the daily charts. The current support around 1.2900 could transform into a dynamic resistance that encourages a decline towards 1.2840. If 1.2900 is able to prove reliable support, prices are seen trading back towards 1.3000.
In the currency markets, the Dollar has extended gains against a basket of major currencies this morning. With the currency on a six-day rally streak, bulls have clearly won the battle this week. However, the upside is still likely to face headwinds down the road as markets still expect the Fed to take a pause on rate hikes this year. Focusing on the technical picture, the Dollar Index is seen challenging 96.80 in the near term.
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This article was originally posted on FX Empire
