Wednesday, September 9, 2015

Euro against the pound sterling straddles resistance | Bank of England monetary policy announcement is later today

Although the Euro appreciated against the pound during the month of August just gone, the pair has become entangled in the EURGBP 200 Day Exponential Moving Average (EMA), as can be seen from the chart above. It looks as if the Forex market is waiting for a catalyst in order to break the logjam. This, of course, would not necessarily have to come from either the Bank of England or the ECB, it could emanate from across the Atlantic. Now that various elections and referendums have been taken care of in the UK, for the present at least, and now that Greece is relegated to the “dealt with” tray, also until something else explodes in that quarter, traders of the Euro against the pound must mark time until the next market-moving event is upon us.

Bank of England monetary policy statement is later today

One potential source for such a development is the Bank of England Monetary Policy Committee Announcement and Minutes, and the Monetary Policy Summary, both of which we will have at 12:00 noon London time today. It is not expected that there will be any change in interest rates or the asset purchase facility figure, but the fact that the minutes are being released now at the same time as the monetary policy announcement is significant. Previously we had to wait two weeks for these. The markets will be watching to see what the voting pattern is for interest rate rises. At the last meeting eight members voted for no change, while one member voted for a rate rise. Any change in this lineup would impact the pound.

Inflation is, as usual, of abiding interest. Headline inflation is tripping along the bottom of the graph, at a about 0.1%. However, core inflation, which does not incorporate energy costs, was running at 1.2% at the last reading. The Bank of England seems to give more weight to core inflation than does, for example, the ECB.

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