- Dovish BoE commentary weighs on the pound
- Two more rate hikes are still heavily priced in
- Major support below around the 200/233-day SMA band
The monetary policy report hearing can often be a much-hyped but ultimately anti-climactic event, with policymakers sticking to the script whenever possible and the Treasury Select Committee frequently blurring the lines between politics and central banking.
While that was probably largely true, it was interesting that Governor Bailey and his colleagues share the view that there is no pre-determined outcome at the next meeting – hike or no hike – which isn’t something that can be said over much of the last couple of years.
A rate hike is still extremely likely at the next meeting on 21 September (82.8% priced in), and one more is still almost fully priced in, which is arguably a surprise based on yesterday's comments.
Source – Refitiv Eikon
Sterling Slides After Dovish Commentary
The pound clearly responded to the comments during the hearing, slipping against the dollar to a three-month low.
Source – OANDA on Trading View
What’s more, that was seemingly backed by momentum, with the stochastic and MACD both recording lower lows at the same time. It also confirmed the rebound off the 55/89-day simple moving average band last week which looked quite a bearish move at the time.
The focus now is on the 200/233-day SMA band, a break of which would further solidify the bearish appearance in the pair. This falls around 1.23-1.24, around the May lows and an area that was firm support in the second quarter of the year.