Top FX Headlines: Did BOE Just Mark the Top in GBP-crosses? JPY in Focus

Commentary, Forex, News

Talking Points:

– The Bank of England voted to hold rates 6-2 earlier today, and their updated economic projections were much more dovish than markets anticipated.
– Outside engulfing bars and key reversals in several GBP-crosses suggest that we may be at the end of the road of British Pound strength.
– Retail traders are dumping their net-short GBP/USD positions after the BOE – a sign of a turn in the trend.
After the British Pound rallied for weeks on speculation that the Bank of England would join the growing chorus of central banks looking to tighten policy, it appears that Governor Mark Carney and the Monetary Policy Committee may have stopped bullish Sterling momentum in its tracks.
The BOE’s 6-2 vote to keep rates on hold today was the more dovish of two most likely voting outcomes (the other being a slightly more hawkish 5-3 outcome). But the true reason for the British Pound’s decline after the policy announcement has to do with the economic forecasts contained in the Quarterly Inflation Report itself.
The developments today represent a subtle but meaningful shift in tone from the BOE, which in turn has spilled over to FX markets. Outside engulfing bars and key reversals in several GBP-crosses suggest that we may be at the end of the road of British Pound strength: EUR/GBP is working on a daily bullish outside engulfing bar; EUR/JPY is working on a daily bearish outside engulfing bar; and GBP/USD is working on a daily bearish key reversal.

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