Andrew Sentance is not alone – the British MPC Meeting Minutes revealed that another member of the MPC, Martin Weale, voted in favor of rate hike. This added pressure raises the chances of a rate hike sooner than later, but it’s important to note that the meeting was held well before the horrible GDP figure. Is this a chance to short sterling?
The other 7 members, including governor Mervyn King, still oppose such a move. One of the other 7 members, Adam Posen, even wants more quantitative easing (pound printing) to boost the economy.
The meeting was held before two key and contradicting figures were released. Inflation, which accelerated to an annual pace of 3.7% was already on the rise and pushed Weale to join Sentance. He probably became more confident when CPI jumped.
But then came GDP, which showed that the British economy squeezed by 0.5%, contrary to expectations of 0.5% growth. This sent the pound way down.
Following the publication of the meeting minutes, GBP/USD jumped above the resistance line of 1.5840, but this was very short-lived and it’s now back down to 1.5825. Above 1.5840, 1.5910 and 1.60 are the next lines of resistance. Support is found at 1.5720 and at 1.5650.
For more technical levels and further events, see the GBP/USD forecast.
Update 16:25 GMT: GBP/USD advanced and bounced just below the aforementioned resistance line of 1.5910. A failure to break above this line will be a bearish sign.
The next big event is the rate decision in the US. Ben Bernanke isn’t expected to make any significant changes, but some changes in the accompanying FOMC statement might shake currencies for many hours, especially if inflation is mentioned.
See the FOMC Preview for more.
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