The losses are coming in fast in the last one hour, with GBP/USD falling from 1.2845 to a low of 1.2790 on the day. There’s no real catalyst as this is a move tied mostly to the pound, with EUR/GBP also now up 0.4% to 0.8450. It’s all about the BOE decision later in the day and this seems to be positioning flows in anticipation of that.
The decision is going to be more of a coin flip and traders had earlier priced in something more to that extent as well.
The odds of a 25 bps rate cut priced in were at ~58% earlier but are now at ~62% to start the session. I shared some comments earlier:
“The central bank is likely to cut the bank rate at the balance, but expectations are for the votes to be either 5-4 or 6-3 in favour of a rate cut. The likely dissenters are Pill, Haskel, Mann, and possibly Greene.
“Naturally, if the BOE doesn’t move with a rate cut today, the decision will be a dovish hold surely. But how will markets take to that?
“Currently, traders are pricing in a ~58% probability of a rate cut. So, therein lies the risk for the pound. It’s pretty much a 50-50 call based on the odds. As such, any decision will result in quite decent price movement as markets readjust their rates pricing.”
This article was written by Justin Low at www.forexlive.com.
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