GBP/JPY bulls failure at the 150.00 handle on hawkish BoE
- Hawkish BoE says: “ongoing tightening" will likely "be appropriate”.
- “Two rate hikes "priced in” according to ING.
The GBP/JPY is trading at around 149.17 down 0.53% on Thursday as traders seem to have bought the rumor and sold the fact. The market deemed there was no groundbreaking news from the BoE, at least no news that would warranty to buy more GBP just now.
As expected, the Bank of England meeting ended up with interest rates unchanged on Thursday, but surprised the markets with a 7-2 voting, as two MPC members voted for a rate increase.
The odds for a May rate hike got higher as the February Inflation Report said that “monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than (previously) anticipated.” Both Ian McCafferty and Michael Saunders voted for a 25bp rate hike in March, which means that the rate hike can soon be on the cards.
The monetary policy statement in March said: “ongoing tightening of monetary policy over the forecast period will be appropriate to return inflation sustainably to its target at a more conventional horizon.”
The BoE didn’t comment on the Brexit transition period however it said that it sees the whole Brexit process has “the most significant influence on uncertainty.”
Here is a Brexit timeline as seen by ING based on the European Commission data.
What could reinforce the Yen is Trump restricting Chinese investment and put tariffs on $50B in Chinese imports for stealing technology.
GBP/JPY daily chart:
Strong resistance is seen at the 150.00 handle with the 55 and 100-period simple moving average seen 70 pips higher. The market found support at the 200 DMA close to 148.00 while it is now trading back into yesterday’s range.
GBP/JPY 1-hour chart:
Today’s selloff was quite sharp. Resistance is seen at 149.50 previous supply zone followed by the 150.00 psychological figure. Intraday support is seen at 148.50, the 200 SMA. If the level is broken to the downside the next scaling point is likely seen at 147.00, the last swing low.