Global macro overview for 09/02/2018

The Bank of England has unanimously voted to keep rates on hold, but it caught markets off-guard with its surprisingly bullish outlook for the economy and interest rates. The statement indicated that interest rates may be raised earlier and faster than expected in November forecasts. BoE sees three hikes in the horizon of the forecast against two before, which meant the statement is very hawkish.

During the press conference, BoE Governor Mark Carney said, that BoE does not intend to "tie up its hands" with the promise of a specific interest rate path and remains open to responding to incoming data. In addition, Carney said at the very beginning, that his first words are a warning against inflationary pressure, which is getting stronger and CPI may still return over 3.0%. The price increase may support the acceleration of wages. To bring inflation to the 2.0% target. there may be a need for faster interest rate increases.

In the new forecasts, the Bank of England raised the projection of GDP growth in 2018 to 1.8% from 1.6%, and in 2019 to 1.8% from 1.7 %. The bank sees inflation above the 2.0% target, and in the long term - at 2.2% in the first quarter of 2020 and 2.1% in the first quarter of 2021. In the commentary, the bank states that spare capacity in the economy is limited and the economy requires a continued reduction of the monetary stimulus.

In conclusion, very hawkish comments and statements from BoE even without the direct interest rate hike. The "somewhat earlier" term used by BoE might suggest, the next interest rate hike will be made as soon as in May 2018.

Let's now take a look at the GBP/USD technical picture at the H4 time frame. The initial reaction on the BoE decision was bullish, but the rally was quickly capped at the level of 1.4081 and since then the price is falling lower towards the level of 1.3818, which is the nearest support. The momentum is still weak and below its fifty level, so the test of the support might happen very soon.

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