Author: Mr. Amar – Technical Analyst
Last night Monetary Policy Report released by the Bank of England (BOE) showed the hawkish result as rate hikes increased by 25 basis points. The decision made was meant to get to grips with stubbornly high UK inflation. Today’s interest rate increase, widely expected, follows the 15 basis points hike in mid-December 2021.
UK inflation is currently running at 5.4%, up from 5.1% in December, and at a multi-decade high. The BoE today said that it expects inflation to hit 7% in the spring before falling back. The UK jobs market should be no impediment for further rate hikes with the unemployment rate currently at 4.2% as UK companies struggle to hire amid record job vacancies.
Despite that, another conflict in the UK ministry is that Cabinet Ministers believe there is a ‘50/50’ chance that Boris Johnson will be forced out of office after four of his most senior aides quit Downing Street and his Chancellor publicly rebuked him. GBP/USD grinds higher around a two-week low after the previous day’s BOE actions and the latest political news which will make GBP/USD prices may continue to rise.
Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias. However, major attention is on today’s US employment details.