Time to buy the Sterling?
Just an hour ago, the Bank of England has raised rates by 0.25%, while there were many rumors about a 50bp rate hike. Rumors buyer’s lifter the Sterling ahead of MPC voting above 1.32. On the voting, many were disappointed with just one dovish dissenter, out of 9 members. Mr. Jon Cunliffe voted to leave rates unchanged, which finally made a little bit of change in the tone of the announcement as well to add the pressure on the Sterling.
Bank of England also is facing the same situation that other central banks are involved in. Therefore in choosing between inflation and stagflation, the monetary policy committee of the Bank of England also chose to have the inflation instead diving into another economic growth crisis.
The inflation expectation of BOE is about reaching above 8%, to can be an alarming level and change many other monetary settings, if just we were not in such geopolitical tensions. However, we do still are positive about the fate of peace talks between Russia and Ukraine, hoping on faster end this conflict. If it happens, the BoE mood may swing back to a hawkish mood next meeting.
So now, while the Pound has lost all daily gains, trading around.131, if market risk decrease, can push the pressure on the US Dollar safe-haven demand. Since both central banks had similar rate hikes, with lower market risk, the Pound can give buy opportunity and US Dollar will be in the sell position. Fundamental data says to be careful, but you can count on the Sterling for mid-term investments and not just for a few days, as the geopolitical situation can change at any time.
From the technical point of view, 1.32 is the key and very important level for Cable. Any uptrend needs to conform to the Daily close above this level. While in the Daily chart technical indicators remain bearish for the H1 and H4 charts, they are changing to have a positive figure.