GBPJPY: BUYFundamental Analysis
Here are the key takeaways from BoE meeting:
1. The Bank of England's Monetary Policy Committee has increased the Bank Rate by 0.5 percentage points to 4%.
2. The vote was 7-2 in favor of the increase, with two members preferring to maintain the Bank Rate at 3.5%.
3. Global consumer price inflation remains high, but is expected to have peaked.
4. UK domestic inflationary pressures have been stronger than expected.
5. The MPC projects that CPI inflation will fall to around 4% by the end of the year.
6. The MPC will adjust Bank Rate as necessary to achieve the 2% inflation target sustainably.
7. The extent of domestic inflationary pressure will depend on the impact of the Bank Rate increases.
What implication could this have on sterling(GBP)?
Well, these are my thoughts:
The increase in Bank Rate by the Bank of England's Monetary Policy Committee could potentially have a positive impact on the GBP as a currency. A higher interest rate can increase the demand for a currency, as it makes it more attractive for investors to hold and deposit funds in that currency. Additionally, higher interest rates may also lead to reduced inflationary pressures, which can further boost the appeal of a currency.
While it is true that higher interest rates can cause the value of a currency to appreciate, it can also make borrowing more expensive, which can impact consumer spending and lead to a slowdown in economic growth. This is where it gets tough, right?
Disclaimer : This is not a financial advice. This is purely my opinion based on my knowledge of macro-economics.
Technical Analysis
Based on technical analysis of the GBPJPY currency pair, there are signs of upward price momentum. The price divergence observed on the M15, M30, and H1 timeframes suggests an over-extended market scenario, which could lead to a corrective move higher. A pristine internal supply zone, located between 159.358 and 158.655, has been created by recent whipsaw price action, providing further evidence that the market could move higher to liquidate this zone.
As a result, I have established a near-term price target of this internal supply zone. If price successfully breaches this zone, I will maintain my position, considering the potential for further price appreciation. However, I'll continuously monitor the market, as additional factors and market developments could impact the performance of my position.
