Sterling is consolidating ahead of the BoE announcement Thursday, after outperforming on Wednesday. Cable is trading north of 1.5350 for the first time in a couple of weeks, after recapturing the 200-day moving average at 1.5315 which is now seen as support. The gain over the last day adds to a rebound that’s being seen after pronounced underperformance over the latter half of September, and comes despite speculation that the minutes to the current BoE’s policy meeting will reveal a shift from a hawkish to a move neutral policy stance.
The changing view of BoE policy follows unexpected weakness in September PMI data that, among other evidence, have indicated slowing growth momentum. The minutes will likely continue to have an unwillingness tighten tightening bias, however, which inherently affords the MPC plenty of space before any hard decisions need to be made. BoE Governor Carney said a couple of weeks ago that the timing of a rate hike will be in “sharper relief” around the turn of the year, a line he has been using since July.
Momentum on the currency pair has turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.