Global macro overview for 15/09/2017:
In the aftermath of yesterday's Bank of England interest rate decision, some MPC members remarks are hitting the newswires. In the response to comments by a member of the Bank of England Gertjan Vlieghe, which suggests that interest rate hikes may be necessary "within months", British Pound appreciates again across the board. In his view, a chance of upward pressure on UK inflation, continued fall in slack, rising wages pressure and household spending, together with robust global growth needed for a rate hike. His remarks are important because Vlieghe is considered the greatest dove among the monetary policy members in BoE. At the same time, he pointed out that there is still a risk that Brexit will have a greater impact on the economy than anticipated.
After the Bank of England September meeting, the narrative might be quickly shifting back to Brexit over the coming weeks. The ongoing GBP rally might only be a one-time boost for the currency as a primary goal of the Bank's hawkish signal as an attempt to realign market expectations with the idea of a gradual BoE tightening path, rather than preparing markets for an imminent rate rise.The heightened UK political uncertainty, which is a result of crucial Brexit-related events in the next few months, means that a November rate hike shouldn't be viewed as a sure thing.
Let's now take a look at the EUR/GBP technical picture at the daily time frame. The price has retraced 50% of the recent leg up and now is trading at the key technical support zone between the levels of 0.8791 - 0.8851. The golden trend line provides additional dynamic support, but in a case of a further decline, the next support is seen at the 61%Fibo at the level of 0.8692.
