GBP/JPY – Slides as the Bank of England Disappoints

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Wibest – Japan Yen: Hands holding Japanese yen bills.

On Thursday, the pound dived after the Bank of England gave the impression that future hikes might not be as aggressive as markets had expected. It also decided not to change interest rates.

The pound seemed to be performing well for a couple of weeks. Traders priced it in one hike this year and at least a few hikes in the following year. However, it seems they might need to reconsider.

The pound has moved against the yen, crashing below the descending channel. 

The speedup of the decline is probably a signal highlighting this is more than a correction in the broader uptrend. The test will be to check if it breaks support around 151.50-152.50, where the 50 and 61.9 fib levels blend with the 56/89-day SMA band. It seems that a rotation off here might serve as a positive signal in the longer term. However, it might take some time before scaling the highs seen a few weeks ago.

 

Dollar Edges Lower

According to Investing.com, in early Monday for European trade, the dollar floated lower, leaving from Friday’s peaks before the release of  U.S. inflation data this week. It might be another test of the Federal Reserve’s consideration over the timing of interest rate hikes.

At 2:55 AM ET, the Dollar Index traded 0.2% lower at 94.253, having climbed as high as 94.646 by the end of Friday. It was marked as its highest level for over a year. In addition to that, EUR/USD edged lower to 1.1565, staying just over the 15-month low of 1.1514 reached on Friday. In the meantime, USD/JPY increased 0.2% to 113.57 after the last week. GBP/USD dropped 0.2% to 1.3488, after falling 1.3426 on Friday, in the wake of the Bank of England’s resolution to keep rates unchanged.

On Friday, before the Fed considered lifting its benchmark interest rates, it called for a further recovery in the labor market. According to the Fed, October nonfarm payrolls expanded by 532,000 jobs, while the data for September showed 313,000 jobs created instead of the previously announced 196,000.

On Monday, there are six Fed officials to speak, giving an idea of how solid the agreement on future rates is at the central bank. This meeting comes before Wednesday’s release of the latest U.S. inflation data, expected to show customer growth. They will further be testing the resolve of the central bankers.

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