Global macro overview for 04/08/2017

Global macro overview for 04/08/2017:

The Bank of England decided to maintain the interest rate at the level of 0.25%, together with Asset Purchase Facility at the same level of 435Bln Pounds. Both decisions were in line with the market participants expectations. There was a 6-2 vote for the current decision from a 5-3 vote at the previous meeting (as expected). Hawkish member Forbes, who voted for a hike at the previous meeting, has left the committee while McCafferty and Saunders again voted for an immediate increase in rates to 0.50% level.

In the Monetary Policy Summary, the BoE stated that some tightening of policy will be required to meet the inflation forecast over the medium term and that policy could need to be tightened to a somewhat greater extent that the market expects if the economy meets forecasts. There were no changes in the inflation expectations since the last meeting, so BoE is still expecting inflation to reach at least 2.0% by the end of 2017. In the longer-term, the domestic inflationary pressures should even intensify but this situation will likely be caused entirely due to the effects of a fall in Sterling. Moreover, for the second time, the BoE stated, that bringing inflation back to target in the short term could be achieved only at the cost of higher unemployment an d a lesser growth in wages.

The overall tone of the report was rather dovish with little evidence at this stage that the bank is looking to consider a near-term policy tightening. This caused a sell-off in British Pound across the board from the recent highs.

Let's now take a look at the GBP/USD technical picture at the H4 timeframe. The market spiked down after the BoE decision but bounced from the navy trend line support around the level of 1.3113. Currently, the price is trading inside a narrow range between the levels of 1.3113 - 1.3161. The next technical resistance is seen at the level of 1.3190.

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