GBPUSD: Hawkish Weale And Forbes. Dovish Haldane?

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  • Martin Weale, one of the Bank of England’s rate-setters, said interest rates need to rise relatively soon as wages pick up. In his opinion tightening labour market means that inflation is likely to rise above target in two to three years’ time. “Policy needs to be set with reference to this, rather than the current rate of inflation.” He added a rise would give the central bank scope to cut if the British economy runs into trouble in the future.
  • Weale said the path of interest rates would depend on the state of the economy which remained uncertain and he would monitor carefully developments at home and abroad, taking account of possible effects of slowing Chinese economy.
  • Weale is the most likely candidate to join Ian McCafferty who was the lone proponent of a rate hike at the BoE’s policy meetings in August and September. Weale and McCafferty voted for rate hikes in late 2014, before the global oil price plunge sent British inflation heading below zero.
  • Another Monetary Policy Committee member Kristin Forbes said the BoE is likely to raise interest rates sooner rather than later, though the exact timing will depend on economic developments. He added that the Bank of England might have to raise interest rates sooner than its models suggest if the GBP’s surge over the past two years has less of an impact on inflation than currently thought.
  • The GBP/USD rose slightly in the morning of the European session in reaction to hawkish comments from BoE policymakers. But we should know that Weale and Forbes are rather hawkish BoE members. That is why the reaction was limited. Traders are awaiting a Twitter (NYSE:TWTR) chat with the Bank of England’s chief economist, Andy Haldane, due at 13:30 GMT. In our opinion Haldane may be much more dovish in his comments.
  • British inflation will be released tomorrow. It is expected to come in at zero. But in our opinion there is a risk of positive surprise. Investors will be also focused on jobs and wages numbers, due a day later. Jobs report is probably even more important than CPI for the central bankers now. Our forecast of earnings is slightly below the market consensus.

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GBP/USD Forex Daily Chart

Significant technical analysis’ levels: Resistance: 1.5476 (high Sep 10), 1.5492 (50% of 1.5820-1.5164), 1.5508 (high Aug 27) Support: 1.5351 (200-dma), 1.5340 (10-dma), 1.5339 (low Sep 10)Source: Growth Aces Forex Trading Strategies

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