Any BOE rate hike tonight could be once-and-done, sell GBP/USD at rally?
Even if BOE raised the interest rate, GBP/USD gain may not be sustainable in coming days.
- Data will be released tonight, 8pm Beijing/HK time; most economists expected BOE to raise the policy rate by 25bps to 0.5%; the decision is not likely to be unanimous.
- Inflation in third quarter ended up averaging 2.8%, 0.1% higher than what MPC forecasted in August.
- If BOE raise the rate tonight, what we need to focus is whether it is the first step towards continued tightening or it is a once-and-done increase.
- We think it will be a “once and done” hike, the next hike could be exercised in late next year or even in 2019.
- If BOE raised the rate tonight, we expect GBP/USD to climb higher as an initial reaction, the price may rise towards 1.3340. However, the price may reverse when the market realises the hike could be “once-and-done”.
Fullerton Markets Research Team
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