GBP/USD: BoE caused volatility
GBP/USD jumped almost to $1.5500 before sliding to $1.5450 on the Bank of England’s Carney comments. EUR/GBP tested 0.8585 before returning to 0.8600.
We witnessed the buy-the-rumor-sell-the-fact scenario. After an initial deep knee-jerk reaction lower to the $1.5200 support in GBP on the news that the central bank isn’t planning any rate hikes for a while, traders covered shorts as the BoE’s policy hasn’t actually become more dovish than it already was. In fact Carney set out the conditions necessary for withdrawal of monetary policy.
BMO: “Overall, our view remains that a “flip” in BoE policy rhetoric towards hawkish is ultimately what will be needed from this point forward to allow UK rates and the GBP to track the economic data higher in tandem. All things considered, today was most definitely not about that “flip”.
Chart. H1 GBP/USD