Today during the London session the BOE meeting minutes were released, which revealed that all the committee members voted in favor of keeping the interest rates at 0.5%. The committee also voted for no change in the asset purchases at £375 billion. This was mostly expected by the market. However, the market was mainly waiting for the insights of the committee members and their views regarding a possible rate hike in the near future. It is important to note that the Bank of England Governor, Mark Carney in a speech earlier during this month stated that an early rate hike cannot be denied. He further added that the economic recovery is strong. This was taken on the positive note by the British pound traders, as the GBP/USD pair surged towards the 1.70 level.
Furthermore, the minutes pointed that the market participants put only around a 15% chance of a rise in Bank Rate by the end of 2014. If we consider historical averages, then the interest rate is at a very low level. Moreover, they also pointed that the economy has started to return to normal, and the central bank’s decision to raise the interest rates would depend on the outlook for inflation.
UK Inflation Report
Earlier during this week, the UK’s Core Consumer Price Index (CPI) data was published by the National Statistics. The market was expecting the inflation rate to remain steady in May. However, the report stated that the UK’s CPI increased by 1.5% in the year to May 2014, down from 1.8% in April. This is well below the BOE’s target of 2%. Today’s minutes also pointed that the short-term outlook has been revised down marginally.
Overall, both risk events failed to encourage the sterling buyers. Technically, the British pound made one more attempt to break and settle above the all-important 1.70 level against the US dollar. However, the GBP/USD pair failed to do so. Earlier after the release of the BOE meeting minutes the pair initially fell close to the 1.6960 level, then climbed back towards the 1.70 level. Currently, the pair is trading below the session lows. The pair traded as low as 1.6930. There is an important swing support just around the 1.6920 level. So, if the pair moves lower close to the mentioned level, then sterling buyers are likely to appear and protect any further downside in the pair.