Pound Surging Higher On Surprise Rate Hike

The British pound has skyrocketed during the trading session on Thursday against most currencies, and of course against the Japanese yen which was not an exception.

There has been an overall risk on type of move for the session, and that will help this pair. It is worth noting that the pair rose to the ¥152.50 level, an area that could be a significant target.

After the Bank of England had raised their main interest rates by 15 basis points to 0.25%, the British Pound rallied in response.

The Sterling pound was half percent higher against the Euro and three-quarters of a percent higher against the U.S. Dollar in the moments following the announcement.

The Monetary Policy Committee (MPC) voted by a majority of 8-1 to increase Bank Rate which in itself can be considered a bullish signal for Sterling, as noted in our preview article.

Gains came against all its major peers in a sign that a good segment of the market was not prepared for the move, expecting policy makers to delay in light of rising Coronavirus cases in the UK.

But the Bank could no longer ignore the spectre of surging inflation that is now well past their 2.0% target and risks settling above target on a longer term basis.

The pound is surging higher. The market had largely welcomed the hike. This a surprise given the recent Omicron onslaught. Investors in large part had come around to the idea the bank would delay hikes into 2022. The pound is expected to remain firm on this move.

The British pound has rallied quite significantly against the Japanese yen during the trading session on Thursday, as the Bank of England raise interest rates.

GBP/USD has been accumulating and broke higher on the daily chart following today’s surprise hike of 15bp from the Bank of England. At the same time, the US dollar has been unable to break the 97 levels in the DXY index.

The price has rallied strongly in a correction of the dominant bear trend and is leaving a wick on the daily candle.

GBP/USD corrects the BoE rallies imbalance towards daily support. 1.3380/90 confluence targets are compelling from an hourly basis.

the market is likely to continue seeing an upward move, due to the fact that the interest rate hike was not forecasted by everyone. It is still just 0.25%, so this is more or less going to be thought of as a repricing of sterling as the two central banks in the US and the UK have essentially the same interest rate. It now becomes a race as to which central bank will become tighter.

There is still a significant amount of resistance above and at this point I think there is probably much more of a likelihood of exhaustion in the short term than anything else. As we approach the 1.34 handle.

The Bank of England’s MPC confused expectations of traders and economists once again as it decided to raise its policy rate by 15 bps to 0.25%. The vote was split 8-1.

Along with the Fed’s pivot to inflation fighting, it illustrates that virus risks are not the central banks’ primary concern anymore. We do, however, hold on to our forecast of a much less aggressive tightening cycle than what is currently priced in front-end rates. We forecast another 25 bps rate hike in the next few months, but expect Bank rate to end the year at 0.50%.