Cable hits 10-month low after BoE’s decision to keep rates unchanged
Cable dipped to the lowest in six months on Thursday after the Bank of England kept rates unchanged for the fist time since December 2021 and against consensus for 25 basis points hike.
The policymakers were split and voted by narrow 5-4 margin to stay on hold, arguing their decision by significant growth slowdown, caused by high borrowing cost, as the economy was already fragile after being hit by Brexit and Covid pandemic.
Although inflation in Britain fell more than expected in August, it remains the highest among the G7 group countries, which keeps the BoE policymakers alerted and ready to act further if necessary, as BoE Governor Bailey stressed that job with inflation was not done yet.
However, the policymakers must be very careful as weak economic indicators warn of further slowdown, which could deteriorate if the central bank continues to tighten its monetary policy.
Fresh extension broke below key short-term support at 1.2307 (May 25 low) but needs to register a daily close below this level to confirm bearish signal and open way for further weakness.
Subsequent bounce from new multi-month low (1.2231) points to increased headwinds, mainly caused by oversold conditions on daily chart which prompted traders to collect some profits.
Limited corrective upticks should stay below falling 10DMA (1.2414) which formed a death-cross with 200DMA and reinforcing bearish structure, are likely to offer better selling opportunities, as pound was additionally weighed by stronger dollar after Fed’s hawkish hold on Wednesday.
Bears face immediate support at 1.2204 (55WMA) and eye targets at 1.2074/00 (Fibo 38.2% of 1.0348/1.3141 uptrend / psychological).
Res: 1.2307; 1.2345; 1.2414; 1.2432
Sup: 1.2231; 1.2204; 1.2074; 1.2000