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  • BOE leaves bank rate unchanged at 4.00% in November monetary policy meeting

    • Prior 4.00%
    • Bank rate vote 5-4 vs 6-3 expected (Breeden, Ramsden, Dhingra, Taylor voted for 25 bps rate cut)
    • Prior 7-2
    • CPI inflation is judged to have peaked
    • Progress on underlying disinflation continues, supported by the still restrictive stance of monetary policy
    • The risk from greater inflation persistence has become less pronounced recently, and the risk to medium-term inflation from weaker demand more apparent
    • Overall, the risks are now more balanced; but more evidence is needed on both
    • The restrictiveness of monetary policy has fallen as Bank Rate has been reduced
    • The extent of further reductions will therefore depend on the evolution of the outlook for inflation
    • If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path
    • Most members placed some weight on the scenario that domestic inflationary pressure has faded more quickly than was assumed in the central projection
    • Greene, Lombardelli, Mann, Pill placed greater weight on risks of persistence in inflation, requiring more prolonged monetary policy restriction
    • These members were concerned that this could stall, as they placed particular weight on the risk of higher inflation expectations or structural shifts leading to inflation persistence
    • Bailey judged that overall risks to medium-term inflation had moved down to become more balanced but there was value in waiting for further evidence
    • Breeden, Ramsden, Dhingra, Taylor dissented in favour of cutting bank rate by 25 bps at this meeting
    • These members attached a greater weight to downside risks, given that these would reflect a continuation of current trends, with particular concerns that household saving would remain elevated and weigh on consumption
    • Dhingra and Taylor argued that policy was already significantly over-restrictive
    • Full statement

    This article was written by Justin Low at investinglive.com.

  • BOE coming up next, are there any potential surprises?

    The expectation is that they will maintain the bank rate at 4.00% this week, though the voting decision is a bit more varied. We are seeing analysts call it from anything between 5-4 to 7-2 in favour of keeping the bank rate on hold but there are a couple of outlier calls as well.

    Money markets are discounting the possibility of a 25 bps rate cut but the decision could end up being much closer than what is priced in. Here are some analysts that are calling for a rate cut to be delivered later today:

    Barclays- 5-4 vote split for a 25 bps cut- “Much of the existing forward guidance is likely to remain, although the
    committee may deliver a hawkish cut by alluding to Bank Rate now approaching neutral.”- Assuming a November rate cut, look for continued quarterly cuts to a terminal rate of 3.50%
    in April next year

    Danske- 5-4 vote split for a 25 bps cut- Chances of a rate cut are “slightly above 50%”- Sees BOE cutting again in February next year to mark terminal rate of 3.50%- “The Autumn Statement is a big joker in all of this. If the Labour government comes through
    with fiscal tightening as we expect, it will support our call for cutting rates quicker than what
    is priced in by markets.”

    Goldman Sachs- 5-4 vote split for a 25 bps cut- BOE to target terminal rate of 3.00%, with quarterly rate cuts through to July next year

    Nomura- 5-4 vote split for a 25 bps cut- “We think a rate cut is a close call… The greatest risk to our November cut view is that the
    MPC opts to wait for substantially more news published ahead of the December meeting.”- “In the event of no November cut we imagine guidance would remain unchanged and –
    depending on what the Bank says in its comments/press conference – the December
    meeting would become very much ‘live’.”- If there is a rate cut in November, there should just be one more rate cut in February 2026 to 3.50%

    This article was written by Justin Low at investinglive.com.

  • GBPUSD Technical Analysis: BoE rate decision in focus

    Fundamental
    Overview

    The USD has been stronger
    across the board since the hawkish turn from Fed Chair Powell at the last FOMC
    press conference. The repricing in interest rate expectations acted as a
    tailwind for the greenback as Treasury yields continued to push higher.

    Yesterday, we got a couple
    of strong US data. The US ADP beat forecasts (although that was expected)
    and the ISM Services PMI came in much better than expected
    with the price index pushing into a new cycle high.

    Despite the strong data,
    the greenback failed to extend the rally. This is generally a signal of a
    short-term top with the market needing more to keep the trend going. In fact,
    the market pricing is now showing a 60% probability of a December cut, which is
    just right. The data in December will probably have the final say and hopefully
    we will get an NFP and CPI report before the next FOMC decision.

    On the GBP side, the BoE is expected to hold the Bank
    Rate steady today at 4.00% and the QT pace unchanged. The vote split is
    expected to be 6-3 in favour of a hold with Dhingra, Taylor and Ramsden voting
    for a cut (Dhingra and Taylor could vote for a 50 bps cut but it won’t be unexpected).

    The central bank will also
    release updated economic projections where a slight downward revision to
    inflation is expected and a new minutes format that includes individual
    perspectives from MPC members.

    The market expects the
    central bank to open the door for a cut in December, so if we get that, it
    shouldn’t be surprising, but it could still weigh on the pound as rate cut
    probabilities would increase. On the other hand, the pound could strengthen if
    we don’t get any signal or hint for a December cut, or even a pushback against
    market’s expectation.

    GBPUSD
    Technical Analysis – Daily Timeframe

    On the daily chart, we can
    see that GBPUSD broke below the key 1.3140 level recently which might have
    opened the door for a drop into the 1.2712 level next. For now, the USD seems
    to have run out of steam as it failed to rally on strong US data. From a risk
    management perspective, the sellers will have a better risk to reward setup
    around the 1.3140 level and the major downward trendline to keep targeting new
    lows. The buyers, on the other hand, will look for upside breakouts to pile in
    and extend the pullback into new highs.

    GBPUSD Technical
    Analysis – 4 hour Timeframe

    On the 4 hour chart, there’s
    not much we can glean from this timeframe as the two key resistance zones
    remain around the 1.3140 level and the 1.3250 where we have the major
    trendline. We need to zoom in to see some more details.

    GBPUSD Technical
    Analysis – 1 hour Timeframe

    On the 1 hour chart, we can
    see that we have another minor downward trendline defining the bearish momentum.
    We can expect the sellers to lean on the trendline with a defined risk above it
    to keep pushing into new lows, while the buyers will look for a break higher to
    extend the pullback into the 1.3140 level next. The red lines define the average daily range for today.

    Upcoming Catalysts

    Today we have the BoE policy decision. Tomorrow, we conclude the week with
    the US University of Michigan Consumer Sentiment report.

    This article was written by Giuseppe Dellamotta at investinglive.com.

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