GBP/USD. Analysis for November 7th. Economists do not expect the Bank of England to raise rates again
November 7, 2023 4:24 pm
The wave analysis for the pound/dollar pair remains quite simple and clear. The construction of a new downtrend segment continues, the first wave of which has taken on a rather prolonged form. In my view, there is no reason for the British currency to resume an upward trend, so I do not even consider such a scenario. The presumed wave 1 or a is complete. As for the euro, wave 2 or b already has a five-wave form, while for the pound, it has taken on a three-wave form. Thus, the wave analysis for both pairs currently allows for a resumption of the decline. This is what I have been waiting for. For the pound, the structure of wave 2 or b should take a minimum of three waves.
Despite the fact that the pound has been on the verge of abandoning the scenario with the construction of wave 2 or b for the past two weeks, the wave picture now looks good and convincing. Therefore, a decline in quotes may begin in the near future. The presumed wave 3 or c could be quite prolonged. The 1.17–1.18 marks are its minimum target.
Only new inflation growth will force the Bank of England to tighten policy again.
The pound/dollar pair’s exchange rate decreased by 40 basis points on Tuesday and by 30 the day before. There was no significant news background today, and the market initiated a corrective decline after Friday. I would like to remind you that in recent reviews, I mentioned that I expected a decline in the pound since the corrective wave is most likely complete. In my view, the wave picture continues to be worked out perfectly. While various surprises are always possible, I currently see no reason to change the current wave labeling.
Economists at UOB Group have concluded that the Bank of England remains open to any scenario. This might seem to indicate an equal probability of both rate hikes and rate maintenance. However, it is not quite so. Analysts believe that the Bank of England will closely monitor inflation in the near future but will only decide on another tightening if inflation starts to pick up again or if wages continue to rise, as they did in the past year.
Both of these indicators are currently very dangerous for the Bank of England since inflation is still very high and wage growth is not far from its peak. Nevertheless, the two rate hike passes indicate that the regulator is no longer ready to take radical measures to lower consumer prices. It appears that they have accomplished the “maximum program” and now prefer a cautious approach. Therefore, I would say that the probability of tightening in the coming months does not exceed 10%. The ECB and the Fed are also maintaining such positions at this time, so all currencies are in the same situation. However, the wave pattern stubbornly predicts further declines for both pairs.General Conclusions.
The wave pattern for the pound/dollar pair suggests a decline within the downtrend. The maximum the pound can expect is a correction. At this time, I can already recommend selling the instrument with targets below the 1.2068 mark because wave 2 or b has ultimately taken on a convincing form and is likely completed. At the beginning, sales should not be substantial because there is always a risk of complicating the existing wave.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are still some differences. The downward corrective segment of the trend continues to be constructed, and its first wave has already taken on a prolonged form, which has nothing to do with the previous upward segment.
The material has been provided by InstaForex Company – www.instaforex.com
The wave analysis for the pound/dollar pair remains quite simple and clear. The construction of a new downtrend segment continues, the first wave of which has taken on a rather prolonged form. In my view, there is no reason for the British currency to resume an upward trend, so I do not even consider such a scenario. The presumed wave 1 or a is complete. As for the euro, wave 2 or b already has a five-wave form, while for the pound, it has taken on a three-wave form. Thus, the wave analysis for both pairs currently allows for a resumption of the decline. This is what I have been waiting for. For the pound, the structure of wave 2 or b should take a minimum of three waves.
Despite the fact that the pound has been on the verge of abandoning the scenario with the construction of wave 2 or b for the past two weeks, the wave picture now looks good and convincing. Therefore, a decline in quotes may begin in the near future. The presumed wave 3 or c could be quite prolonged. The 1.17–1.18 marks are its minimum target.
Only new inflation growth will force the Bank of England to tighten policy again.
The pound/dollar pair’s exchange rate decreased by 40 basis points on Tuesday and by 30 the day before. There was no significant news background today, and the market initiated a corrective decline after Friday. I would like to remind you that in recent reviews, I mentioned that I expected a decline in the pound since the corrective wave is most likely complete. In my view, the wave picture continues to be worked out perfectly. While various surprises are always possible, I currently see no reason to change the current wave labeling.
Economists at UOB Group have concluded that the Bank of England remains open to any scenario. This might seem to indicate an equal probability of both rate hikes and rate maintenance. However, it is not quite so. Analysts believe that the Bank of England will closely monitor inflation in the near future but will only decide on another tightening if inflation starts to pick up again or if wages continue to rise, as they did in the past year.
Both of these indicators are currently very dangerous for the Bank of England since inflation is still very high and wage growth is not far from its peak. Nevertheless, the two rate hike passes indicate that the regulator is no longer ready to take radical measures to lower consumer prices. It appears that they have accomplished the “maximum program” and now prefer a cautious approach. Therefore, I would say that the probability of tightening in the coming months does not exceed 10%. The ECB and the Fed are also maintaining such positions at this time, so all currencies are in the same situation. However, the wave pattern stubbornly predicts further declines for both pairs.General Conclusions.
The wave pattern for the pound/dollar pair suggests a decline within the downtrend. The maximum the pound can expect is a correction. At this time, I can already recommend selling the instrument with targets below the 1.2068 mark because wave 2 or b has ultimately taken on a convincing form and is likely completed. At the beginning, sales should not be substantial because there is always a risk of complicating the existing wave.
On a larger wave scale, the picture is similar to the euro/dollar pair, but there are still some differences. The downward corrective segment of the trend continues to be constructed, and its first wave has already taken on a prolonged form, which has nothing to do with the previous upward segment.
The material has been provided by InstaForex Company – www.instaforex.com
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