Carney Is Not Satisfying GBP Bulls, So We Sold GBP/USD
As I mentioned in the first forex update, today is going to be all about central banker heads. It all started with Draghi, followed by the BOE Stability Report and Carney. Later in the evening, we are expecting a speech from Yellen and a number of central bank members.
Right now it´s Carney´s turn. I don´t know what the forex market was expecting from him, but I don´t think the market knows either. Judging from price action, it doesn´t know what to make of Carney´s comments. So I guess the general idea for forex traders in regard to this forex event will be to “wait and see”.
To me, he´s sounding a bit dovish. Carney “sees stability risk from Brexit”. Although he said that the UK election results won´t change BOE plans, it was clear that he wasn´t completely comfortable with it and I don´t blame him. I don´t think May´s weak government will last long, which is negative for the GBP.
The most hawkish comment was “consumer credit growth has far outpaced income growth in the last year”. That´s dovish for the economy because it means that economic growth is based on borrowing credit. Once the rate hikes start moving higher, the borrowing costs will go up to, the UK consumers and businesses will borrow loss, spend less and invest less, thus causing the growth to falter.
But, that´s a bit hawkish for the GBP in the short term, because it means that the BOE might be forced to hike interest rates if inflation keeps running higher.
The previous candlestick looks pretty bearish
GBP/USD jumped for a moment above the 200 SMA (purple) on the hourly forex chart, but it quickly dived back down. We opened a sell forex signal around there, which is progressing pretty well, but I hope that the weakness we have seen in the USD this morning doesn´t ruin our plans.
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