The PMI index for the UK services sector was at 55.6 points, thus recording the strongest move for more than six months. Market participants were expecting further drops in the index, which was to be 53.3 points against 53.6 points previously. A significant factor in today's estimates is the increased business activity of entities based in the UK.
Yesterday, the Bank of England hiked the interest rate from 0.25% to 0.50%, as expected, with the vote count 7-2 (Sir David Ramsden and Sir Jon Cunliffe dissented) in line with expectations, but against the consensus view of a 6-3 vote count. Bank of England did not comment on current market pricing (two hikes over three years, this is also what the BoE's projections are based on), meaning the BoE keeps its flexibility. Moreover, the BoE said it will "monitor closely" the incoming data "including the impact of today's increase in Bank Rate". During the press conference, BoE Governor Mark Carney said the rate hike is just a "small adjustment" and that the BoE has "stretched the horizon of which CPI inflation should return to 2.0% target due to unusual circumstances" (possibly he meant Brexit). Still, Carney noted that inflation is expected to remain slightly above 2.0% even assuming the two hikes over three years currently priced in the market.
In conclusion, it was a "dovish hike" and overall a natural signal to the markets from BoE. The question remains, whether BoE will be ready to hike the rates again as it will stay on hold next year and not hike again before 2019, so this is more about taking back the emergency cut from August 2016 just after the Brexit vote.
Let's now take a look at the GBP/USD technical picture at the H4 time frame. After the BoE interest rate decision, the market plummed towards the technical support at the level of 1.3067 and made a low at the level of 1.3040, just above the technical support at 1.3030. The price is still locked in a narrow horizontal zone and all of the attempts to break out of the zone were fake so far.
