20th June 2019 - Now, the turn is to BOE to show its easing sign

Walid Salah Eldin

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The market will be waiting today for another MPC meeting and it is expected to show tendency to easing as ECB and Fed have done previously following materialized easing actions by other central Banks such as RBA and Bank of Russia to face the global economic slowdown amid growing geopolitical concerns and worries about the trade war implications.
While The uncertainty surrounding UK Brexit is still dominating the trading of GBP and weighing down on EUR ahead of widely expected success of Boris Johnson to lead of the Conservative Party and take May's office directing UK to more conflicts with EU.
Boris Johnson is not only the most preferred person to Trump in UK but he was also the architect of Brexit when he was the Mayor of London and one of the most important reasons why millions in UK have chosen to split, after campaigning by him and the EU parliament member Lagarde.
Boris Johnson can really lead to Hard Brexit and bad relationship threatening the business spending in UK which will be in need eventually to more confidence in its economic outlook by easier monetary stance to produce jobs away from EU, while the inflation level in UK was standing close to its 2% yearly goal in the most recent months and as we saw yesterday UK CPI rose by 2% in May.
While the Brexit extension to next Oct. 31 can drive the UK economy to longer stalling and lower confidence in business spending waiting for certainty.
So, BOE is expected to show stronger easier signs than others and I see it is to cut the interest rate at least once before by Oct. 31 to boost confidence and stimulate the demand for meeting the supply building up at a closer point to avert further economic deterioration in UK.

So, The markets will be waiting today also for BOE economic analysis, after it has expected previously lower GDP growth lower by only 1.2% this year from 1.7% it was expecting last November, expecting growth in 2020 by only 1.5% from 1.7% it was expecting last November.
BOE expected previously CPI retreating could be temporarily below its 2% yearly goal in the recent months and that has already happened amid growth decelerating and lower energy prices.

An easing action today is not priced in, but MPC can hint today to a close cut and vote again this meeting in favor of leaving the benchmark interest rates unchanged at 0.75% and holding unchanged BOE’s APF at Stg435b re-investing the cash flows associated with the redemption of the gilt held in the Asset Purchase Facility.

After The Fed became closely monitoring incoming info " US-China Trade talk outcome - US labor report figures - US inflation which is looking to stall longer bellow Fed's 2% yearly goal" to act as appropriate to prop up the economic expansion, dropping down its patience wear on the current increasing uncertainty weighing down on the economic outlook in US.


The ECB has previously sent its easing sign too by its president Mario Draghi who has indicated this week that cutting interest rate will remain part of the ECB's toolkit, despite the current deposit rate standing deeply in negative territory, after it has shown that it is a very important tool, like QE which can also have considerable headroom.

The risk appetite has been boosted in the recent hours by The central banks growing easing tendency and Trump's will to de-escalate his trade war with China to pave the way for successful meeting between him and the Chinese leader XI on 28–29 June in Osaka in the coming G20 summit.

The governmental bonds yields across the broad were down, adding brightness to gold which is now trading well above $1380 per ounce, while the greenback is still depressed versus its rivals, after The Fed's talking yesterday which was more dovish than expected.
GBPUSD is now trading above 1.27 but close to it waiting for BOE's turn and EURUSD became in a closer place to 1.13, while USDJPY is holding trading close to 107.70, despite the Risk-on Sentiment which is usually drives down the Japanese currency as a low cost financing currency.

Oil surged on the central banks change of guidance to stronger Pro-Growth stance can increase the demand for energy, while OPEC and its allies are looking close to extend their supply cut for 6 months more.

GBPUSD Daily Chart:

GBPUSD-Daily-20-06-2019 11-18-01 ص.jpg



GBPUSD extended its rebounding from 1.2505 to 1.2725 ahead of today session to look now for containing its slide from 1.2762, after holding its formed supporting level last Dec. 12 at 1.2476 unbroken
After this rebounding extension, the pair became trading in its first day above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today 1.2505.
However the pair is still depressed by continued trading below its daily SMA50, its daily SMA100 and its daily SMA200.
GBPUSD daily RSI-14 is now referring to higher existence inside the neutral area reading 51.227.
GBPUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is still having its main line inside its neutral territory at 59.762 leading to the upside its signal line which is lower inside this same region reading only 32.090
This relatively big discrepancy between the leading main line and the signal line expresses about the higher momentum the pair could gain recently, after positive crossover inside its oversold territory below 20 on forming a bottom at 1.2505 last Tuesday.


Important levels: Daily SMA50 @ 1.2827, Daily SMA100 @ 1.2958 and Daily SMA200 @ 1.2930
Experienced S&R:
S1: 1.2505
S2: 1.2476
S3: 1.2365
R1: 1.2762
R2: 1.3047
R3: 1.3176

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din