We waited for it too long (almost 10 years, actually) and it happened. The Bank of England pushed interest rates up to the pre-Brexit levels. Over a year ago, the Bank made an emergency rate-cut from 0.5% to 0.25%. Ramsden and Cunliffe became the dissidents as expected.
We agree with those who think that today’s step did not mean the start of a gradual tightening. The regulator just wanted to take back the emergency cut of the last August. Today’s event determined GBP's destiny for the upcoming months. The sterling had its toughie area at 1.3280-1.3300 and slumped to the lows at 1.3098 as the inflation outlook is still dovish. The pound could not settle above the higher levels.
Our next target to the downside is the October lows at 1.3020. If this area capitulates, the pair might be right back to the August lows. Let’s keep in mind two more risk factors – the announcement of the new Fed Chief and a tax bill announcement.