MARKET BRIEFING – LONDON OPEN 06.11.2015
Yesterday lunch time the Bank of England announced that they would keep their Official Bank Rate on hold at 0.50%.
The decision by the Monetary Policy Committee in favour of not moving to increase interest rates from the current levels was in line with expectations.
The official voting for the Bank Rate of 1-0-8 was also in line with expectations. The lone dissenter on the Bank of England Monetary Policy Committee was once again Ian McCafferty.
Mr. McCafferty argued in favour of increasing interest rates by 25 basis points from 0.50% that they have stood at since March 2009 to 0.75%.
However, what did surprise the markets, was both the Bank of England Inflation Report and the subsequent press conference which conveyed a message that was extremely doveish.
The Bank of England released some forecasts and revisions which were more or less in line with previous releases.
The Bank of England, however, did emphasize downside risk to inflation and assumed an interest rate of only 0.8% in early 2017. This is due to concerns surrounding global growth.
This is in stark contrast to the Federal Reserve which removed external country factors which have been identified in China, the Emerging Markets and closer to home in the Euro-Area.
This news sent traders long of the British Pound looking for cover as Cable crashed and EURGBP rallied.
Until recently, many commentators argued for and some expected the Bank of England to move on interest rates before Janet Yellen and her colleagues on the FOMC took action of their own.
However, the doveish surprise that was delivered yesterday has seemingly ended this scenario. With the Federal Reserve poised to increase its own Fed Funds interest rate, the divergence between the British and United States interest rate forward forecasts has become very apparent.
This divergence between the United States and United Kingdom interest rate expectations if confirmed by a December lift off by the FOMC has the potential to drive down Cable to levels below 1.5000.
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.0975
Target 2: 1.0790
Projected range in ATR’s: 0.0097
Daily control level: 1.1050
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5300
Target 2: 1.5100
Projected range in ATR’s: 0.0098
Daily control level: 1.5400
USDJPY
The intraday technical outlook
Trend 1 hour: Up
Target 1: 122.50
Target 2: 121.00
Projected range in ATR’s: 0.78
Daily control level: 120.60
USDCHF
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.0000
Target 2: 0.9865
Projected range in ATR’s: 0.0080
Daily control level: 0.9880
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.3275
Target 2: 1.3060
Projected range in ATR’s: 0.0109
Daily control level: 1.3140
AUDUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7215
Target 2: 0.7070
Projected range in ATR’s: 0.0072
Daily control level: 0.7125
GOLD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1118.00
Target 2: 1090.00
Projected range in ATR’s: 14.26
Daily control level: 1111.00
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 47.60
Target 2: 44.50
Projected range in ATR’s: 1.51
Daily control level: 47.20
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