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Pound is trading almost flat around 1.54 against dollar awaiting policy guidance from Bank of England (BOE). BOE would announce monetary policy decision around 11:00 GMT.
- With election risk subsiding monetary policy becomes central theme over pound's movement. Pound is enjoying bullish bias as election was much more decisive than indicated by poll and with hawkish statement from Bank of England would push it to further highs. However pound bulls are yet to break key resistance around 1.55.
BOE policy and expectation -
- BOE is maintaining policy rate at 0.5% and asset purchase target around 375 billion. No change is expected today, however policy statement might hold the key for future monetary policy indication.
- As of now, at one hand Bank of England policymakers, including Governor Mark Carney has maintained rhetoric that hike is the most likely policy moves and they have declared pound to be overvalued on the other.
Impact -
- Not much is expected from pound should the statement remain unchanged. Without any strong indication it is more likely that rallies would remain capped by 1.55 resistance area. Break out of the resistance would push pound to test resistance around 1.6 against dollar.
- However downside remains significant and sell off might gather pace should pound break 1.535 interim support.
