The pound is waiting for tips from the Bank of England

The meeting of the Bank of England and the release of data on British inflation for November, forcing investors to closely monitor the pound. And let the sterling in recent times often ignore macroeconomic statistics and show heightened sensitivity to politics, it cannot go on indefinitely for so long. As soon as the issue with Brexit is resolved, everyone will again be engaged in studying the BoE worldview. It is quite possible that in December, the regulator will give a hint as to its further actions depending on the change in the political landscape.

By the end of October, the average wage increased by 3.3% y / y. After the indicator showed an acceleration in the first half of the summer, in August, the Bank of England raised the repo rate to 0.75%, the maximum value since the global financial crisis. In December, no one expects him to do his deeds, which is primarily due to political motives. As soon as the situation with Brexit clears up, BoE will have a free hand. In the meantime, the derivatives market does not expect a tightening of monetary policy before 2020. It is possible that after March 2019 these expectations will shift to a much earlier time, which will support the pound.

Dynamics of average salary and repo rates


In the meantime, the "bulls" on GBP / USD are trying to translate the battle into the clinch after active attacks by opponents, who have increased the pair's quotes to around 1.25. The catalyst for sales was the increasing likelihood of Brexit's indiscriminate after Theresa May canceled a vote in the British Parliament. The Prime Minister has returned to Brussels and, according to the chief negotiator for the EU, Michel Barnier, is trying to revive previously rejected ideas. French President Emmanuel Macron and German Chancellor Angela Merkel categorically declare that there can be no revision of the treaty. Formally, the situation looks like a stalemate, but in fact, London has the opportunity to cancel article 50 unilaterally, invalidate the referendum and return to life in the European Union. If events develop according to such a scenario, according to Commerzbank analysis, the EUR / GBP pair will drop to 87 (median forecast of Bloomberg experts is 88). According to the bank, almost all the negative has already been taken into account in the quotes of sterling, while the euro still has room to fall against the background of the weakness of the eurozone economy, the growing risks of the ECB monetary expansion and unresolved issues with Italy.

As for GBP / USD, a lot here will depend on the outcome of the last 2018 FOMC meeting. The Fed is facing a difficult task. The central bank is at a point where excessive passivity can lead to uncontrolled inflation, and activity can lead to a recession. It is not surprising that he changes the aggressive rhetoric to restrained and tries to focus on incoming data, which theoretically could weaken the US dollar.

Technically, on the daily chart of GBP / USD consolidation takes place in the range of 1.25-1.27. Breaking through its lower border will open to the bears the way to the south in the direction of the target by 161.8% according to the AB = CD pattern. On the contrary, a confident assault on resistance at 1.27 will increase the risks of a rollback to the current downtrend.

GBP / USD, the daily graph


The material has been provided by InstaForex Company -