Bank of England Headquarters in City of London, UK. Image source: Rafael Ben-Ari © 123RF.com
On Thursday the Monetary Policy Committee (MPC) of the Bank of England decided to keep the Bank Rate in the country unchanged at 0.75 per cent in December, by a majority vote of 0-2-7.
The most significant excerpt from the monetary policy meeting was that for the second consecutive time two of the Committee’s nine members voted for the reduction of the rate, attesting to the need for a somewhat more accommodative policy.
As it was argued in our ‘Weekly Expectations’ article from Monday, the most crucial indicator that could swing the ultimate decision of the MPC in either direction was and remains to be, inflation.
In the monetary policy statement from yesterday, it was alleged that:
“CPI inflation remained at 1.5% in November, and core CPI inflation remained at 1.7%, broadly as expected. The headline rate is still expected to fall to around 1¼% by the spring, owing to the temporary effects of falls in regulated energy and water prices.”
The admission that inflation in the United Kingdom is expected to continue deteriorating away from the Bank of England’s 2 per cent target means that the MPC might have to loosen the monetary policy further in order to accommodate price stability.
UK Inflation Rate. Image source: TradingEconomics.com
The apparent waning of aggregate spending in the economy can be attributed mostly to uncertainties connected to impeded global trade and long-term Brexit ambiguities.
Another crucial indicator is the fact that despite the robust employment in the United Kingdom, wage growth has been somewhat subdued, which, in turn, curbs sustained consumer spending and leads to lessened inflation.
Thus, a reduction of the interest rate in Q1 of 2020 might be needed to support higher rates of customer and investor spending, in addition to acting as an insurance against heightened uncertainties, resulting from a likely no-deal divorce of the UK from the EU.
The words of the Committee members further confirmed this in the monetary policy statement:
“Monetary policy could respond in either direction to changes in the economic outlook in order to ensure a sustainable return of inflation to the 2% target. The Committee will, among other factors, continue to monitor closely the responses of companies and households to Brexit developments as well as the prospects for a recovery in global growth. If global growth fails to stabilise or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in UK GDP growth and inflation.”
Such changes, however, might be left to be implemented by Andrew Bailey, who was named earlier today as the 121st governor of the Bank of England.
Bailey will succeed Mark Carney in February, which would most likely happen immediately after Britain finally withdraws from the European bloc, which is scheduled to occur on the 31st of February.
One of the most pressing tasks ahead of BOE’s future new governor would be to promote price stability and support the recent strengthening of the pound, which has lost a lot of its power since the Brexit vote in 2016.
Meanwhile, the GBPUSD has expectedly fallen to the major support level at 1.29800, as we argued in our previous market update.
The price of the pair is likely to consolidate in a narrow range ahead of the anticipated low-liquidity market environment next week, which is expected to be prompted by the diminished trading activity around the Christmas holidays.
GBPUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
Over the past few weeks, the USD has lost nearly 800 pips against the JPY, driven by Japan's shift away from decades of negative interest rates. With the Bank of Japan raising rates for the second time in a row, investors are adjusting their positions to [...]
Despite its volatility, Silver remains in an uptrend. While not as dynamic as Gold, XAG often mirrors XAU’s movements. A Multiple Top has formed around $32.50, and history shows that the more a level is tested, the weaker it becomes, increasing the likelihood of a [...]
A combination of factors, including Trump-era tariffs, the emergence of DeepSeek, and a slowdown in GDP growth, has contributed to the recent pullback in the US30 from its record highs. From a technical standpoint, a Double Top pattern has formed around the [...]
Over the past month, Silver has experienced an impressive 13% surge, marking a strong bullish trend. Despite notable volatility and multiple pullbacks, the overall momentum remains firmly to the upside. This strength is further validated by the Golden Cross, a historically reliable [...]
The Swiss Stock Market has been on a remarkable rally, surging over 15% between December and January. At times, the price action resembled a near-vertical ascent. However, following the announcement of Trump’s tariffs over the weekend, Monday’s trading session opened with a [...]
Between October and January, GBPUSD experienced a significant decline, dropping by approximately 1300 pips. However, we now observe signs of a potential trend reversal. Over the past few weeks, the pair has rebounded by more than 400 pips, shifting momentum toward a [...]
For the past 1 month, the UK100 saw a fantastic 600 point rally! The occasional corrections only attracted more buyers, which is healthy for the current up trend and the RSI currently exhibits elevated demand. A 130 point correction started last week on Friday, dipped below the [...]
Over the past two weeks, Japan’s leading stock index surged 2,000 points, reflecting strong bullish momentum. However, this week saw a sharp sell-off, erasing nearly all gains since mid-January. Despite this drop, the decline stalled at the 61.8% Fibonacci retracement, a key [...]
There is a clear shift in the momentum in the Oil market, with the commodity dropping with nearly 10% for the past 2 weeks. The Death Cross, a classic sell signal, is indicating that sellers are indeed in control and we are lookin now at a strong [...]
The 350 pip rally for the past 2 weeks seems like a trend reversal for EURUSD, with buyers back in control. The strong bullish momentum is also confirmed by the Golden Cross, a historic buy signal. Corrections are healthy for the trend and we currently looking at [...]
For the past 2 weeks GBPUSD went up with 400 pips and this is why we believe we might be looking at a trend reversal. The strong bullish momentum is confirmed by the Golden Cross, a classic buy signal, which supports the hypothesis that [...]
The Death Cross formation in USDJPY signals a robust downward momentum, with the USD depreciating by 300 pips over recent weeks. Further declines exceeding 300 pips are anticipated, potentially reaching the 152.00 level. Despite several corrective pullbacks, the price has been unable to surpass the [...]
Following the formation of a Double Top pattern at the 21,930 level last Friday, the NASDAQ has experienced a significant decline, plummeting by nearly 800 points. This downturn has been primarily driven by unfavorable manufacturing data emerging from China, alongside the Bank of Japan's interest rate hike on Friday. The market reaction closely resembles the [...]
GOLD's uptrend has regained strength, with several factors supporting further gains. The RSI bounced from oversold levels and now stands at 65, signaling growing demand and increasing buying volume. Additionally, the appearance of a [...]
For the past few months, USDJPY gained 2100 pips! Then, about 10 days ago the USD started dropping and so far corrected with 300 pips, dropping down to 155.00. A local Double Bottom got formed and this level also aligns with the important [...]
For the past week, the US100 has surged by over 1,000 points, signaling strong bullish momentum. The RSI stands at 69, indicating high demand and buyer dominance. A bullish Golden Cross pattern has emerged, confirming the upward trend. Despite a brief correction yesterday, with the index dipping to [...]
The Descending Triangle on the 4-hour chart, typically a bearish signal, failed to materialize this time. Instead, the Triple Bottom support at 92,000 held strong, driving significant buying volume. A Golden Cross—a classic bullish indicator—confirms strong [...]
After a 300-point correction from its December highs, the SP500 appears to be rebounding as bulls regain control. This recovery is supported by positive economic data, including strong NFP numbers, low unemployment, and CPI readings meeting expectations—all favorable for stocks. Additionally, the earnings season began yesterday with [...]
For several months, the EUR has been trending downward, losing hundreds of pips. While occasional corrections to the upside occur, bears remain in control. The strong downward momentum is highlighted by the Death Cross pattern, a classic sell signal. Yesterday, we observed another [...]
The Dollar remains strong, with buyers firmly in control since the Fed's December comments hinting at fewer 2025 rate cuts. This drove a 400-pip rally in USDCAD, now facing resistance near 1.4450 as early buyers take profit. Corrections are part of healthy trends, and the pair is testing support at [...]
