GBP/USD Daily Fundamental Forecast – November 3, 2017
The focus of the market for yesterday was clearly on the pound as the market was anticipating the BOE to hike rates. This was likely to lead to a lot of volatility and action and the pound certainly did not disappoint the markets post the announcement. But the pound did not move in the direction that the market expected it to and this caught a lot of traders by surprise.
GBPUSD Crashes on BOE Dovishness
The BOE was expected to hike rates and presented a rosy and hawkish picture of the UK economy but while the BOE did deliver on the first promise, it didnt on the second one. The BOE hiked the interest rates by 0.25% but presented a grim reminder of the state of the UK economy. It pointed out how the Brexit was causing a lot of pressure on the UK economy and that the economy was still some way off the targets that the BOE had set it. It also hoped that the situation would improve in the future which would help the BOE to support the economy in a better manner.
What all this implied was the fact that there would not be a series of rate hikes as the market was expecting. This was more like a one off rate hike which the BOE had to do to keep the engine running and it was a warning to the markets to probably expect a maximum of another single rate hike for the next year or so. This was less than what the market expected and they sold off the pound which dropped by about 2 cents to reach the 1.3050 region and continue to trade in a weak manner.
Looking ahead to the rest of the day, we do not have any major news from the UK but we have the NF employment and wages report from the US which is likely to determine the short term direction of the dollar. It could also determine whether the Fed would hike rates in December or not and if it comes out stronger, then it could cause further pain to the pound.
This article was originally posted on FX Empire