The Attention Is Focused on the Bank of England Meeting

Last week, the GBP/USD currency pair held the key offer zone of 1.42750-1.43400, which caused a correction movement. Demand for the US dollar increased significantly after the publication of an optimistic report on the labor market. In January, 200,000 new jobs were created in the non-agricultural sector of the country, which is 8.7% higher than the market expectations. The unemployment rate remained at the same level of 4.1%. The increase in the average hourly wage justified the expectations of experts and amounted to 0.3%. At the same time, the December value was revised upwards to 0.4%. Additional pressure was put on the pound by weak economic reports from the UK. In January, the business activity in the manufacturing and construction sectors slowed by 1.6% and 3.8% to 55.3 and 50.2, respectively.

At the same time, the head of the Bank of England, Mark Carney, said that the labor market was stable, and wages were growing at a steady pace. The attention of the Central Bank will be focused on high inflation, which exceeds the target level. It should be recalled that at the end of last year, the regulator raised its key interest rate. On Thursday, February 8, the Bank of England will take a decision on further monetary policy and publish a quarterly report on inflation. Experts expect that the regulator will leave the key interest rate at the previous level of 0.50%. It should be noted that since the last meeting of the Bank of England, the conditions in the financial markets have become more severe. The pound has strengthened against the US dollar by more than 5%. The yield of UK government bonds has risen by 25 basis points. We recommend you to pay attention to the comments and rhetoric of the Bank of England representatives.

UK Government Bond
The analysis of the CME exchange data (Chicago Mercantile Exchange) allowed to distinguish the option levels of the major players' interest for January 05 – February 09:
  • The resistance zone – 1.3700-1.3800
  • The support zone – 1.3450-1.3550
  • The option balance level – 1.3625
GBP/USD Pattern

At the moment, the GBP/USD quotes have fixed above the monthly control zone of 1.3700-1.3800, which indicates the power of the buyers. Nevertheless, in the near future, a correction movement may develop. We do not exclude that the Bank of England can take a cautious stance because of the sharp pound strengthening the beginning of this year. The GBP/USD currency pair may turn back to the range of 1.40000-1.38750.

Alternative option. If the Central Bank is optimistic and points out the possibility of the interest rates increase in the near future, the GBP/USD currency pair may test the offer zone of 1.47250-1.43400.

by JustMarkets, 2018.02.05

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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