GBP is underperforming following the BoE’s Super Thursday
(decision/statement/minutes/Inflation Report) with a less hawkish shift hinting
to the emergence of a gap between the normalizing Fed and a BoE that appears set
to remain on hold for longer than previously expected, said Eric Theoret, FX
Strategist at Scotiabank.
Key Quotes
“The 8-1
vote for a hold at 0.5% was unchanged from the prior meeting and the Inflation
Report tone highlighted expectations of a slower rise in inflation relative to
August and underscored concerns about downside risks to the inflation forecast.
Specifically, the ‘dampening influence of sterling’s past appreciation on
inflation is expected to be persistent, diminishing only slowly over the MPC’s
forecast period’.”
“GBP is testing fresh November lows, and liable to
weaken further as market participants adjust to the emergence of Fed-BoE
divergence. EURGBP appears to be forming a bullish outside reversal off its late
August lows”.
“GBPUSD short-term technicals: bearish — signals are
bearish and hint to acceleration, with confirmation from bearish trend
indicators. Medium-term indicators are also bearish as we consider the break of
the 50 day MA below the 200 day MA. We look to a near term break of 1.5250
followed by the early October lows around 1.5100 (middle chart).”
