Today’s a big day for the British Pound. The Bank of England’s Quarterly Inflation Report (QIR) took on a tone decidedly more dovish than the market had anticipated, leading to the biggest volume day (thus far) in GBPUSD on FXCM trading platforms in all of 2014:
There are two aspects to this report that we care about. First, the reason for the major surge in GBPUSD (GBPUSD=X: CCY) trading volume and associated crumble in the pair. Our best guess is that the BoE’s slice in half of Q4 wage growth expectations would be the main culprit, followed by the shift in the BoE’s projected natural rate of unemployment to 5.5% from 6-6.5%.
The second aspect of the BoE’s QIR that we care about is the technical impact being levied on the GBP-crosses. In particular, there are a significant number of GBP-bearish key reversals developing across the spectrum, including in GBPCHF, GBPJPY, and GBPUSD.
