Lukman Otunuga
ForexTime (FXTM)
The British Pound was thrown a much-needed lifeline today following an unexpectedly hawkish statement and MPC vote split from the Bank of England.
Market expectations over a possible UK interest rate hike this year were boosted after the monetary policy committee voted 6-3 in favour of keeping rates unchanged. Policymakers expressed optimism over the tepid first-quarter economic growth being temporary, which opened the door to a potential rate hike in August. While today’s hawkish surprise fromthe BoE could boost the Pound, which remains highly sensitive to monetary policy speculation, gains are likely to be capped further down the road. With Brexit-related uncertainty not only damaging buying sentiment towards the Pound but also potentially obstructing the BoE’s path towards monetary policy normalization, Sterling remains vulnerable to further weakness.
King Dollar clobbers Gold
Gold has been repeatedly attacked by a broadly stronger Dollar for the most part of this trading week.
One would have expected heightened trade concerns to elevatethe yellow metal, but prices simply remained at depressed levels. Hawkish comments from Fed Chair Jerome Powell at the ECB Forum simply worsened matters for zero-yielding Gold, with prices tumbling to fresh six-month lows. While uncertainty over global trade tensions may offer some support further down the road, investors seem more concerned with an appreciating Dollar and Fed hike expectations. Focusing solely on the technical picture, Gold is firmly bearish on the daily charts. Sustained weakness below the $1280 level could open a path towards $1260.
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