Cable edges lower on Thursday, reversing a good part of post-Fed rally, after the US central bank disappointed many who expected more aggressive action and remaining within a consolidation range, which extends into sixth consecutive day.
BoE’s policy meeting is the key event today, with the central bank being on course for the fourth rate hike since December, the fastest increase in borrowing cost in 25 years, with wide expectations for raise by 0.25% raise to 1%.
The central bank faces a problem with balancing between inflation over three times above its target and still rising and threats of slowdown, as their action against high inflation could push the economy into recession.
With the rate hike being already priced, investors will be focusing on BoE’ s comments for signals on further moves, as markets bet on rates rising to 2.25% / 2.5% by December.
Sterling is likely to rise on such scenario, but traders remain cautious on possible ‘dovish hike’ in which the central bank would temper the tone for the period towards the end of the year.
Res: 1.2590; 1.2637; 1.2697; 1.2750
Sup: 1.2516; 1.2450; 1.2411; 1.2359
