Article by ForexTime
Cable dropped following the Bank of England Inflation Report, which trimmed both GDP and inflation forecasts, noting that CPI is likely to fall below 1% within six months. The news was the catalyst that saw sterling give back gains seen on a generally good employment report, with the October claimant count dipping by 20.4k, which was more than expected. Cable lost nearly 1 big figure in making a low of 1.5850, which swung last Friday’s 13-month low at 1.5790 back into range.
The BoE trimmed GDP and CPI forecasts in its latest Quarterly Inflation Report. The GDP projection for 2015 was reduced to 2.9% from the 3.1% projected in the August Report, and to 2.6% in 2016, down from 2.7%. Consumer Inflation is now seen at 1.4% year over year in 2015, down from the 1.7% projected in the August Report. The BoE reported that CPI is likely to fall below 1% within six months, before returning to 2% target by the end of the three-year forecast horizon.
The downward revisions reflect the weaker global outlook and a softer profile for private sector domestic demand, while weaker food and other commodity prices and year over year appreciation in the trade-weighted value of sterling have weighed on inflation. The BoE notes downside risks from the Eurozone.
The technical outlook shows a consolidative pattern that is in a slow downtrend. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The RSI (relative strength index) edged lower with price action, printing a reading of 37, which is on the lower end of the neutral range.
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