The british pound was marked by the best weekly of the dynamic against the basket of major global currencies over the past nine years, to strengthen against the dollar, to 3% after the Bank of England has signalled that it was ready to tighten monetary policy. It is interesting to note that the dollar does not look like a scapegoat. The reduction of geopolitical risks surrounding North Korea and the growth of the likelihood of the Fed’s monetary restriction against the acceleration of inflation to 1.9% resulted in the «dollar» to finish the five-day session in positive territory against the majority of competitors to the G10. More gains for the pound sterling!
It is one thing when the market grows at the date of the rate increase and then brings it closer, as in the case of the Fed. It is quite another when the chances of tightening the monetary policy to grow dramatically, as in the case of the Bank of England. Guided by the need to implement its own projections of inflation, the regulator has clearly said that he would increase the repo rate in the near future. And if someone does not believe in him, and then the speech Gertjan Vlieghe forced to do so.
The most serious «doves» of the Monetary Policy Committee, said that the wage increase, the growth of the world economy, and of household expenditures, making it possible to expect that the first rate increase in the coming months. The derivatives market believes that this will be the case in November.
The probability to raise the repo rate
When an ardent opponent of the policy of monetary restriction speaks the language of the «falcon», it becomes the best driver of the currency of growth. The book has proven that, after having strengthened during the day of 1.5% relative to the U.S. dollar.
The minutes of the last meeting of the Bank of England, and Gertjan Vlieghe proved that the «doves» remained in the minority. During this time, the pound sterling, and the sensitivity to future versions of macroeconomic statistics is expected to increase. It seems that the BoE is less worried than before about the problem of the reduction of real wages. However, if retail sales show a decline in purchasing power, then the problem is to remind of itself. The publication of the indicator is planned for 20 September.
For the U.S. dollar, the major event of the week will be the FOMC meeting. The committee may reduce the forecast of inflation and to alter the expected path of the federal funds rate, which will have an impact on the long-term outlook for the USD index. The Fed continues to be concerned about the dynamics of personal consumption expenditure and the acceleration of the August CPI may ultimately be the usual market noise. It is hardly expected that the signal from Janet Yellen and her colleagues about the act of currency restriction in December will be the reason for the purchase of the «dollar». The futures market as well as the pawns 59% of the likelihood of this happening.
Technically, the bulls have managed to reach a target 161.8% AB = CD pattern very quickly, after which the correction of the increased risks in the direction of 1.34-1.345. To continue to the north of the tendency to 1.377 (targeting 200% for AB = CD), the clients need to update the September maximum.
GBP / USD, daily chart