Sterling Depreciates Sharply Ahead of BoE’s Policy Rate Decision, 70+ PIP Volatility Likely; May 05, 2022

BoE U.K. Interest Rate Decision

Today U.K. has scheduled to release Interest Rate Decision at 1100 GMT/1630 IST. Short term interest rates are the paramount factor in currency valuation – traders look at most other indicators merely to predict how rates will change in the future. Monetary Policy Summary discusses the economic outlook and offers clues on the outcome of future votes.

In today’s meet, traders anticipate 25bp hike to 1.00 pct vs 0.75 pct previous release. In addition, U.K. is facing highest inflation in last 30 years to 7.00 pct in March. On the other side, Food and energy prices are continued to rise in U.K. If BoE rises interest rate today as per expectations then it will be the forth hike in row. BoE is too facing the same issue of reining in inflation without stomping out growth. During last meet BoE Gov Bailey indicated that the Bank may look to take a more incremental approach to tightening, rather than following the U.S. Federal Reserve with a 50 basis point hike. As we know that the BoE has began unwinding its balance sheet in February, passively reducing the record £875 billion of U.K. gilts held at the start of the year. Traders expect that BoE could begin active gilt sales when the bank rate reaches 1%.

Let’s wait for the BoE’s Monetary Policy Summary for the further guidance and check it out how GBP has reacted during the previous data release:

March 17:

Feb 03:

Technical View:

GBP/USD:

• The sterling starts a new day on a lower note ahead of BOE’s Interest Rate Decision and hovers around $1.2520 mark.
• Today pair made intraday high at $1.2634 and low at $1.2517 mark
• A day chart is down and H1 chart with triple EMA suggests up trend for the time being.
• A sustained close above $1.2580 on H1 chart will check key resistances.
• Alternatively, a consistent close below $1.2510 will check further supports.

Take a look and do trade wisely!
Good Luck