BoE: A Dovish Turn Coming?
Fiona Cincotta September 19, 2019 10:53 AM
Will the BoE take a dovish turn as data weakens?
The pound ticked higher versus the dollar in early trade despite weaker than forecast UK retail sales. However, a stark no deal Brexit recession warning from the OECD has since pulled sterling back to the flatline versus dollar. The pound is weaker versus the euro.
What does the data say?
UK GDP surprised to the upside and UK wage growth remains strong. However, amid ongoing Brexit uncertainty and slowing global trade, the UK manufacturing and construction sectors are in a downturn, the dominant service sector is stagnating, retail sales disappointed and inflation is at a 3-year low and ticking away from the central bank’s 2% target.
Whilst GDP and wage growth are very closely watched indicators, the overriding picture of the economy has turned gloomier.
The BoE decision will be closely watched. However, Brexit is the principal driver of the pound.
As the pressure is mounting on the two sides to get a deal done, the OECD released a report highlighting the expected economic consequences of a no deal Brexit. The report makes for grim reading with the UK economy expected to immediately experience a heavy decline in trade and fall into recession; the longer-term impact could also be pronounced, holding back the UK’s economic potential.
The three-day hearing at the UK Supreme Court will to an end, adding to the potential of a volatile day for sterling.
Levels to watch GBP/USD:
The pair must make a meaningful move above key psychological level and 100 DMA $1.25 to increase the prospects of a move towards resistance at $12560. Strong momentum could take the pair towards $1.26.
On the downside $1.2440 would need to be broken down prior to $1.24 and onto $1.2380.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.