Global macro overview for 20/06/2017:
Bank of England Governor Mark Carney has a different point of view regarding the interest rate hike. Today's comments from Carney stated that inflationary pressure is still weak and that the Bank of England should not consider a rate hike in the nearest future. As we remember, last week three out of eight BoE policymakers voted to raise the cost of money, which pushed the GBP / USD rate above 1.2800. Carney said: "From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular, anaemic wage growth, now is not yet the time to begin that adjustment. In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations."
Carney's words put an end to expectations for a quick raise soon. The BoE monetary policy would be set to return inflation sustainably to target over the medium term while supporting the necessary adjustments in the economy. The latest 5-3 vote split will probably change at the next BoE meeting as Forbes will leave the committee at the end of June to be replaced by Tenreyro. So far there is no clear evidence whether she will adopt a hawkish or dovish stance, although there are suspicions of a more dovish tone, especially given concerns surrounding Brexit.
Let's now take a look at the GBP/USD technical picture on the H4 time frame. The pair is being sold and it has broken below the technical support at the level of 1.2690 after Carney's speech. The stochastic and momentum indicator all point down, so the bias remains bearish. The most important support is at the level of 1.2633.
