Cable had the first positive week since Brexit, riding on some political certainty and the no-cut decision of the BOE. However, the same BOE also gave us very thick hints about the next meeting on August 4th. They made it clear that fresh stimulus is on the cards.
But is it really the case? If the economy needed stimulus, why did they refrain from action? Well, perhaps there is no stimulus on the way, at least no rate cuts. According to BOE member Martin Weale, “early action on rates may not be needed”. He is not so sure whether he will personally back rate cuts in the upcoming meeting. In the previous one, there was only member voting for a cut, and that was not Weale.
Cutting rates in order to avoid market disappointment is “not a good reason” according to his words. Does he represent the whole MPC? Probably not. But his words do support the pound, at least for now.
GBP/USD is up to 1.3265, recovering the losses seen in the aftermath of the Turkish coup attempt and extending the gains on his words. Resistance is at 1.3320 followed by 1.3480. Support awaits at 1.31.
On the other hand, persistent worries about the housing sector limit gains. A report by RICS does not look too positive.
Here is the chart:
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