Introduction
The foreign exchange market has been volatile for a while now, and the British pound is no exception. Sterling hit an early April peak around 1.2525 but has since then lost a bit of momentum. The Bank of England’s Governor, Andrew Bailey, has cautioned investors against making assumptions regarding the policy rate outlook. This article delves deeper into the current situation of Sterling amidst Bailey’s statements.
Bailey’s Cautionary Comments
The Bank of England’s Governor, Andrew Bailey, has recently cautioned investors against making any assumptions regarding the policy rate outlook. His comments came amidst speculation about the bank’s next move in terms of interest rates. The UK’s economic recovery has been quicker than expected, and some investors have started to speculate that the bank might raise interest rates sooner than anticipated. However, Bailey’s comments have cautioned against such assumptions. His statement suggests that the bank is still closely monitoring the economic situation and will not make any decisions until it has all the necessary information.
Sterling’s Consolidation
Sterling’s momentum has slowed down after hitting a peak in early April. However, the broader uptrend in spot remains intact, and longer-term momentum studies are still bullish. The intraday patterns are more neutral, with the GBP capped by resistance at 1.2455 (bullish above here). This means that Sterling’s price action still looks consolidative despite losing some momentum.
Bank of England’s Neutral Approach
Bailey’s recent cautionary statements suggest that the Bank of England might take a neutral approach when it comes to policy rate outlook. This approach means that the bank will not make any hasty decisions and will wait until it has all the necessary information before deciding on the next move. If the issue comes up during the next monetary policy committee meeting, Bailey might take the same neutral approach.
Conclusion
The current situation of Sterling is a result of Bailey’s cautionary comments and the broader uptrend in spot that remains intact. Sterling has lost a bit of momentum, but the price action still looks consolidative. Bailey’s statements suggest that the Bank of England might take a neutral approach when it comes to the policy rate outlook. This means that investors should not make any assumptions about the bank’s next move and should wait for the bank to make an official announcement.
