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Bank of England's interest rate decision is implemented today. Is pound and the United States a good opportunity to buy at the bottom?
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Hello everyone, today XM Foreign Exchange will bring you "[XM Group]: The Bank of England's interest rate resolution is implemented today, is the US a good opportunity to buy at the bottom?" Hope it will be helpful to you! The original content is as follows:
On Thursday (September 18), the British pound fell 0.23% against the US dollar against the US dollar during the Asian and European period, and traded at 1.3592. In the early morning, due to the landing of the Federal Reserve's interest rate decision boot, many currencies made a profit against the US dollar fell. The US dollar index rebounded sharply due to this impact, and the US dollar also broke out of a high and a decline.
Although the Bank of England is likely to maintain the current interest rate unchanged, there are still uncertainties in voting differences. Coupled with the tail risks at the Federal Reserve level, short-term exchange rate trends have fallen into high uncertainty.
Bank of England policy prospects:
Because the Bank of England does not release its new economic forecast until November, if interest rates are not unexpectedly adjusted at this meeting, foreign exchange market fluctuations will mainly rely on three aspects: subsequent UK inflation and employment data, MPC monetary policy statement (including voting results), and Governor Andrew Bailey's post-meeting press conference to observe whether the Bank of England will end quantitative tightening.
The economic data recently released on both sides of the Atlantic (including UK inflation and labor market data) are mixed, but they have not changed the core market judgment - the Bank of England's benchmark interest rate will stabilize at 4% for the rest of 2025. Judging from swap market pricing, as of the Bank of England's December meeting, the interest rate change expectations were only included, and the full 25 basis points of interest rate cut expectations must be postponed to April 2026. UK inflation and employment data are the core of the UK interest rate resolution.
There are voting differences in the UK MPC, and the xm-forex.committee's position may influence the short-term trend of pound and the United States. Looking back on the last vote of the Bank of England Monetary Policy xm-forex.committee (MPC) to support the interest rate cut at a 5:4 ratio, and a second vote is required to finalize the resolution. This meeting requiresKey points: If two votes (market expects) support a rate cut again, it may trigger a "loose expectation repricing" of the short-term UK Treasury curve, suppressing the exchange rate of pound-US.com; if the vote unanimously supports maintaining interest rates, pound-US.com is likely to boost and rebound.
If the president's speech, the UK's quantitative tightening (QT) slows down, it will put pressure on the US. Affected by the severe fiscal situation in the UK, long-term Treasury bond yields fluctuate sharply, and the market generally expects the Bank of England to slow down the QT process. It is important to be wary of: if the Bank of England fails to slow down QT as scheduled (a hawkish signal), it may instead suppress the long end of the UK Treasury bond curve, indirectly putting pressure on the pound-to-US exchange rate.
Beware of the Bank of England's policy setting exceeds expectations and the risks of the Federal Reserve's tail.
After the Fed's interest rate resolution boot was implemented, it cut interest rates by 25 basis points. After that, the Fed's hawkish speech was a bit inferior to expectations for the market. Although the Bank of England's resolution is the focus today, the continuity of the trend after the Fed's meeting on Wednesday is more worthy of attention.
The current median Fed policymakers expect two more interest rate cuts this year, tending to be a more moderate easing cycle than market pricing. However, this time the US dollar and the U.S. bond market responded flatly, exceeding market expectations.
Federal independence concerns (such as Trump’s appointment of officials to “force the palace”) have not xm-forex.come true: Waller and Bowman (appointed by Trump) both support a 25 basis point rate cut, not voted against it as in July;
The game between market pricing and data: The current market pricing "a cumulative interest rate cut of 125 basis points by the end of 2026", and whether it can be realized xm-forex.completely depends on labor market data (the precedent of non-agricultural weakness in summer 2024 does not push up the unemployment rate must be vigilant).
Historical experience shows that "delayed reactions" often occur after the Fed meeting. We need to be vigilant at present: If the market realizes that "the expectation of looseness is too full" when digesting the Federal Reserve's policy in the future, it may trigger a further rebound in the US dollar and a pullback in the US bond market, indirectly impacting the pound-to-US exchange rate. On the contrary, if the subsequent data is less than expected, there is still a lot of room for betting on interest rates and futures.
Although the market generally expects that the Bank of England will maintain the current benchmark interest rate unchanged, coupled with the potential tail risks at the Federal Reserve level (small-probability extreme policy events), it has led to a high degree of uncertainty in the short-term trend of pound and the United States.
Technical Analysis
Technical signal is weak: bullish momentum is gradually exhausted, the relative strength index (RSI) on the 14th fell simultaneously, the moving average convergence divergence (MACD) has not yet confirmed the bullish signal. The Fed-related tail risk may further push up the volatility of the US dollar. At present, the US pound and US continue the pullback trend, and the short-term upward support breaks. The recent trend of the US pound and US shows a clear pullback signal: first, it recorded the "meteor line" (bearing K-line pattern), and then fell below the short-term upward trend support level since the low on September 3, marking that the short-term exchange rate will return to the adjustment.
Short-term support focuses on the connection between multiple highs of the exchange rate in the recent 1.3589. If it is lost, it is highly likely to test the 20-day moving average and head, shoulders, bottom and neckline. If it continues to fall below or evenIt will test the support range of 1.3450-1.3370. If the exchange rate rebounds, the recent high of 1.3725 and the January 2022 high of 1.3749 are the core resistance levels.
Echoes the trend, technical indicators weaken simultaneously: on the 14th, RSI fell below its own trend, and MACD has not confirmed the bullish signal, and the overall point to the short-term pound-US short-term pattern.
Trading focus on the day: Bank of England resolution and US initial unemployment claims data
Bank of England resolution: The announcement time is 19:00 Beijing time, and the core focus is on voting results, policy statements' statements on interest rate paths, and the policy tendency released by Bailey's press conference;
Number of initial unemployment claims in the United States: 90 minutes after the resolution is released. As the closest real-time labor market indicator, its data performance will directly affect the market's expectations of the Federal Reserve policy, and thus affect the trend of the US exchange rate of pound and US.
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