Sterling fell sharply after the BoE meeting minutes showed the central bank is shifting its concerns to deflationary forces rather than inflationary pressures.
Yesterday’s comments by BoE member Fisher were only a prelude to today’s MPC meeting minutes which showed the BoE believes the current weakness in demand growth will continue for longer than previously thought. The central bank also noted risks the European debt crisis may weigh on future demand. However, what drove the sell-off of sterling this morning was the BoE left the door open for further asset purchases should deflationary forces emerge.
With fundamentals beginning to shift against sterling, a glance at the technicals show weekly and monthly stochastic are falling for the GBP/USD which could keep pressure on sterling in the near term. Short term resistance comes in at the May 24th low at 1.6060. A breach here might open the door to the March 28th low at 1.5935.
Read more forex trading news on our forex blog.
Other relevant articles you may like
Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
