Date: 01 Aug 2019
The Bank of England is widely expected to keep interest rates unchanged later today as they resist the temptation to follow other central banks and loosen monetary policy. The risks of a hard-Brexit scenario has also increased over the last month, leading to an increase in predictions that the Bank of England will cut rates before January 2020.
Boris Johnson’s recent appointment as the British Prime Minister has certainly boosted the chances that the United Kingdom could face a departure from the European Union in less than one-hundred days time. Bank of England Governor Mark Carney also faces a challenging time guiding fiscal policy as politicians play the Brexit game.
Should the United Kingdom secure a deal with the European Union before October 31st, the Bank of England would then be in a position to actually increase interest rates. A wait-and-see approach is likely to be applied by the Bank of England until the outcome of negotiations between the UK and the European Union is absolutely certain.
The Bank of England is expected to strike a downbeat tone later today, given that some UK macroeconomic data has been softening and global economic risks have increased. Some positive commentary should also be expected, as UK employment and wage growth remain robust, while UK unemployment is at historic lows.
Later today we also see the release of the July UK manufacturing PMI and the Bank of England quarterly inflation report, which is likely to be a market mover and somewhat positive for the British pound. CPI inflation has been consistently hitting the Bank of England’s target over the last few months, after bottoming-out at the start of the year.
EUR/GBP Daily Candlestick Chart Source: ActivTrader
The euro currency is currently having a major technical breakout against the British pound, following a move above the important 0.9050 resistance level earlier this week. The 0.9305 and 0.9400 levels are now the key upside resistance levels to watch above the 0.9180 level, while key technical support for the EUR/GBP pair is found at the 0.9120 and 0.9080 level.
Written by Nathan Batchelor, External Analyst, ActivTrades
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