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May 05 - 11:55 AM

GBP/USD - COMMENT-Sterling Bulls Eye Hawkish BoE Hold Thursday After In-Court ADP

By Paul Spirgel  —  May 05 - 10:17 AM

GBP/USD rose on Wednesday but trimmed earlier gains after near-expectations ADP EMnAQN044IDU and ISM services data [nN9N2KB00Q] did nothing to damage the U.S. recovery story, leaving sterling bulls to hope for a hawkish BoE outcome in the next session.

Cable held near the lower end of its early U.S. 1.3925-1.3895, range but still anchored near the upper end of its recent trading band within the 30-day Bolli envelope spanning 1.3680 and 1.3993.

As focus shifts to Thursday's BoE meeting nL1N2MS0J6, the question is whether MPC will join Canada in tapering its asset purchase program, with rates widely expected to remain on hold.

Currently purchasing GBP 4.4bn gilts per week, the BoE will meet its 2021 target of GBP 875bn by September.
With the UK economy turning a corner, it is almost certain the BoE will not add to its existing program and will likely lower its QE target in 2022.

A hawkish BoE hold, beginning at least with taper talk, could catapult cable above its April 20 trend high at 1.4009 and 1.4022's 61.8% Fib of 1.4240-1.3670, putting the Feb. 24, 2021, high at 1.4240 in sharper focus nL1N2MS0WI.

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Source:
Refinitiv IFR Research/Market Commentary

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