The Bank of England (BoE) is currently facing scrutiny and criticism for its slow response to the significant decline in UK price growth. The latest official data has shown a substantial drop in consumer price growth, with figures plummeting to 3.9% in November from 6.7% in September. This unexpected decrease in price growth has triggered market reactions and has led investors to speculate that the BoE will start easing its policies earlier than indicated in its official communications.
Despite lower readings for core inflation and services price growth, the BoE’s Monetary Policy Committee has persistently insisted on its readiness to raise rates above 5.25%. However, analysts are warning that the central bank may be waiting too long to pivot on its monetary policy. The market has already priced in a quarter-point cut by May, with an anticipation of a total 1.38 percentage points cut in 2024.
The Bank of England’s cautiousness in relaxing its monetary policy too early stems from its consideration of potential risks, such as disruptions in shipping caused by geopolitical events. It is understandable that the central bank is treading carefully and not rushing to make decisions that could have unforeseen consequences.
Looking at the GBPUSD chart, it is evident that the currency pair is approaching a drop-base-rally demand zone. This demand zone is supported by other confluence factors, including trendline support, the 200-day moving average support, the 88% Fibonacci retracement level, and a bullish market structure. Based on this analysis, the expectation is for a bullish movement.
Analyst’s Expectations:
– Direction: Bullish
– Target: 1.27217
– Invalidation: 1.24943
EURGBP has been exhibiting a bullish rally for three consecutive weeks. However, the question arises: when will this bullish momentum end? By observing the chart, it becomes apparent that the likely target of the current bullish momentum is a supply zone that intersects two resistance trendlines. Additionally, there is the formation of a possible head-and-shoulder pattern, which further supports the expectation of a bearish reaction once price reaches the identified supply zone.
Analyst’s Expectations:
– Direction: Bearish
– Target: 0.89529
– Invalidation: 0.87678
GBPCHF has been experiencing a bearish momentum triggered by a rejection and the formation of a head-and-shoulder pattern from the 100-day moving average resistance. Despite this downward movement, it is believed that GBPCHF has yet to reach its intended destination. The expectation is for GBPCHF to create a new lower low. However, it is crucial to note that the ultimate outcome will be determined by the price action.
Analyst’s Expectations:
– Direction: Bearish
– Target: 1.06382
– Invalidation: 1.07824
The trading of Contracts for Difference (CFDs) is not without risks. To succeed in these trading opportunities, it is essential to manage risks properly. Traders should conduct thorough research, exercise due diligence, and employ appropriate risk management techniques to avoid costly mistakes. The current criticism faced by the Bank of England for its slow response to the decline in UK price growth highlights the importance of timely and effective monetary policy decisions.
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