Sterling rebounded after making a new trend low following the BoE Minutes from the November 5-6 monetary policy committee meeting. The vote on interest rates remained unchanged along with the dissenters who favor an increase in benchmark interest rates.

BoE minutes meeting revealed a 7-2 vote to leave the benchmark repo rate at 0.5%, with members McCafferty and Weale continuing their dissent in favor of a 25 basis point hike for a fourth consecutive month. The minutes noted that there was “a material spread of views on the balance of risks to the outlook” among the seven voting for unchanged policy.

The pound, moved higher as the minutes surprise some traders who learned there is division among member views following last week’s publication of the latest Quarterly Inflation Report on GDP and CPI forecast which were downgraded and had sent a dovish message. McCafferty and Weale continued to argue that low inflation was the product of a higher pound and low raw material prices, and small increases in interest rates would be better now to avoid bigger ones down the line, which could disrupt the markets.

Official retail sales, which are scheduled to be released on Thursday are expected to show an increase of 0.2% month over month, which is a rebound and a 3.4% year over year increase, up from respective figures of -0.3% and 2.7% in the previous month. Record high total employment levels have been underpinning solid consumption, and the most recent average household income data showed the first positive inflation-adjusted rise in several years.

Despite rebounding, the GBP/USD is in a downtrend with resistance seen near the 10-day moving average at 1.5755. Momentum is negative with the MACD (moving average convergence divergence) index) printing in negative territory with a downward sloping trajectory. The RSI (relative strength index) is moving higher from oversold territory which could foreshadow a rebound.

The post appeared first on Forex Circles.


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