The Pound Is Rising on Additional Interest Rate Hike Expectation
The Bank of England (BoE) has unexpectedly lifted its interest rates to 0.25% from 0.1%, which is the rate at which rates have been set for the last three years without any changes. The move was made on Thursday as inflation in the United Kingdom jumped to 5.1% year-on-year in November from 4.2% a month before. Moreover, the BoE indicated in its statement that inflation would continue to expand to 6% by April 2022, well above its 2% target.
The United Kingdom has become the first developed country that has hiked interest rates. Investors suggest that monetary policymakers are ready to make an additional interest rate hike by 25 basis points to 0.5% next February.
The Federal Reserve (Fed) announced this week that it would increase its tapering to $30 billion a month starting mid-January from $15 billion, where it stands at the moment. This could mean an end to its bond-buying program in March 2022. According to the Fed’s dot-plot chart the American monetary watchdog may raise interest rates three times next year and another three times in 2023. What could this particularly mean?
In the first place the U.S. Dollar would be a leading party to the European single currency as the European Central bank (ECB) noted on Thursday it will continue with its stimulus bond buying program beyond April 2022. However, some spikes of the Euro should not be excluded. The Pound becomes a leader vs the Greenback, while not only receiving technical reasons for a rally, but fundamental ones too.
Once again, I have to note that the Cable is moving alongside the “falling wedge” reversal pattern that may push the Cable to 1.3800. The resistance line of this wedge was broken last Friday, and last Thursday the Cable received additional reasons for the rise finishing the day above EMA13 and EMA21 on the daily timeframe chart. The Pound may receive an additional spin as the “morning star” pattern would be completed this week.
The next target for the Cable would be 1.3400-1.3450 that is a resistance of the December 2020 and the September 2021 lows. The closest support level is at 1.3280-1.3285, where it would be certainly interesting to open buy positions.
The United Kingdom has become the first developed country that has hiked interest rates. Investors suggest that monetary policymakers are ready to make an additional interest rate hike by 25 basis points to 0.5% next February.
The Federal Reserve (Fed) announced this week that it would increase its tapering to $30 billion a month starting mid-January from $15 billion, where it stands at the moment. This could mean an end to its bond-buying program in March 2022. According to the Fed’s dot-plot chart the American monetary watchdog may raise interest rates three times next year and another three times in 2023. What could this particularly mean?
In the first place the U.S. Dollar would be a leading party to the European single currency as the European Central bank (ECB) noted on Thursday it will continue with its stimulus bond buying program beyond April 2022. However, some spikes of the Euro should not be excluded. The Pound becomes a leader vs the Greenback, while not only receiving technical reasons for a rally, but fundamental ones too.
Once again, I have to note that the Cable is moving alongside the “falling wedge” reversal pattern that may push the Cable to 1.3800. The resistance line of this wedge was broken last Friday, and last Thursday the Cable received additional reasons for the rise finishing the day above EMA13 and EMA21 on the daily timeframe chart. The Pound may receive an additional spin as the “morning star” pattern would be completed this week.
The next target for the Cable would be 1.3400-1.3450 that is a resistance of the December 2020 and the September 2021 lows. The closest support level is at 1.3280-1.3285, where it would be certainly interesting to open buy positions.
