Bank of England Meeting. Results

Ben Graham · Novembro 6

First of all, I want to note that demand for the British currency rose on Thursday. For the last three weeks, the pound sterling has only been declining, but today it is rising. Perhaps the Bank of England made a "hawkish" decision or hinted at a longer maintenance of the interest rate at its current level? What else could have happened at the meeting if the pound had been rising after falling for three weeks straight amid a somewhat contradictory news backdrop?

At first glance, the outcomes of the BoE meeting leave one confused. The pound sterling, which has recently fallen on any given factor—even reacting to Rachel Reeves' triple comments about the need to raise taxes in the UK to avoid a budget deficit—has risen on apparently more "dovish" results than expected by most market participants. The interest rate, as I mentioned, remained unchanged at 4%, but the MPC's voting results on the rate brought a "dovish surprise."

It turned out that the number of officials favoring a new round of monetary policy easing was four, not three as expected. Recall that there are nine members of the MPC, so five votes are sufficient to form a decision by simple majority. Thus, we may have seen a new interest rate cut.

It's worth mentioning that the call for a new round of monetary policy easing was supported by the weakness in the labor market. The weakness is certainly not as severe as in the U.S., but the British labor market has also faced challenges recently. Additionally, the British economy has struggled to recover for the past ten years, and even a "super-beneficial" trade deal with Donald Trump and the U.S. has not changed the situation. Therefore, the BoE has grounds to ease, but what about inflation?

The current consumer price index stands at 3.8%, and many economists noted in October a slowdown in price growth, as this figure remained unchanged from the previous month. Personally, I don't understand what there is to celebrate when inflation was at 3.8% and has remained at that level. Where is the slowdown? It should also be noted that inflation in the UK has been accelerating for over a year, while the BoE's target continues to drift further away. Therefore, I believe the British central bank made the only correct decision. But how to handle the four "doves"?

Wave Picture for EUR/USD:

Based on the conducted analysis of EUR/USD, I conclude that the instrument continues to build an upward segment of the trend. Currently, the market is in a pause, but the policies of Donald Trump and the Fed remain significant factors for the future decline of the U.S. dollar. The targets for the current trend segment may reach the 25-figure level. At this time, we can observe the formation of corrective wave 4, which is taking a highly complex, elongated form. Therefore, in the near term, I still consider only buying, as any downward structures appear to be corrective. The latest structure, a-b-c-d-e, may be nearing completion or may already be finished.

Wave Picture for GBP/USD:

The wave picture for the GBP/USD instrument has become more complex. We continue to deal with an upward, impulsive segment of the trend, but its internal wave structure is becoming more complex. Wave 4 is forming a three-wave shape, and its structure is significantly longer than that of wave 2. Another downward corrective structure is nearing completion. I continue to expect the main wave structure to resume its formation, with initial targets around the 38 and 40 figures, and I think this may occur as early as the beginning of November.

Key Principles of My Analysis:

Wave structures should be simple and understandable. Complex structures are difficult to trade and often involve changes.
If there is uncertainty in the market behavior, it is better not to enter.
There will never be 100% certainty in market direction. Always remember to use protective stop-loss orders.
Wave analysis can be combined with other types of analysis and trading strategies.

The material has been provided by InstaForex Company - www.instaforex.com