The GBP/USD pair is trading largely unchanged on the day around 1.5180 following a 180 pip rally on Wednesday. The immediate focus is now on the Bank of England (BOE) rate decision and minutes release.
Low inflation – a well known fact
The BOE monetary policy committee (MPC) is expected to vote 8-1 to keep rates unchanged. The traders would be interested to see how policymakers see cost pressures unfolding in the days ahead. The minutes could reiterate prospects of low inflation in the short-term on account of lower oil and commodity prices.
Minutes may comment on job losses in the mining sector and worsening trade deficit
Comments on the labor market are likely to be positive, with a slight chance of policymakers expressing concerns regarding future job losses on account of a sharp slowdown in the mining sector. The mining heavyweights like Anglo American announced job cuts yesterday.The situation may worsen if commodity rout continues and the minutes could take a note of the same. Meanwhile, comments on the worsening UK trade deficit could hurt GBP as well.
Overall, the minutes could carry a dovish tone, but if the vote count changes to 7-2, Sterling would spike across the board.
GBP/USD Technical Levels
At 1.5175, the pair appears stuck between 1.5167 (38.2% of 1.5336-1.4895) and 1.5185 (23.6% of July 2014-April 2015 plunge). A break higher would open doors for 1.52 resistance ahead of the major hurdle at 1.5248 (50% of Apr-Jun rally+38.2% of Aug-Dec rally), which, taken out (in case vote count changes to 7-2) could see the pair run into the falling channel resistance at 1.5316.
On the other hand, below 1.5167 the pair may find support at 1.5165 (daily low+Dec 4 high) ahead of the major support at 1.5113 (23.6% of 1.5819-1.4895). A break below the same would expose 1.5027 (Nov 6 low).