EUR/GBP – BoE policymaker pushes back against market interest rate expectations

• UK inflation falling fast but still high
• BoE Greene does not agree with market expectations
• EURGBP stalls again near highs

Inflation figures from the US and UK have been very promising, so much so that markets see almost no chance of another rate hike in this cycle from either the Fed or BoE and a high likelihood of a rate cut by the end of the second quarter of next year.

That’s despite one BoE policymaker, Megan Greene, pushing back against that, although it is worth noting she does sit at the hawkish end of the committee having recently been in the minority voting for a rate hike. While her concerns over wages and where interest rates will land in the future are perfectly reasonable, it seems markets are more aligned with the dovish end of the MPC.

I expect many policymakers will continue to push back against markets for now until they can be absolutely certain that inflation has been controlled and is on a path back to 2%. A late pivot has likely always been the strategy and I expect it remains the case. Higher for longer remains the mantra but I suspect it won’t be too much longer now.

Another sign of trend exhaustion?

EURGBP has been moving higher again over the last couple of days but once more there are signs that it may not have what it takes to break such a big zone of resistance.

EURGBP Daily

Source – OANDA on Trading View

As highlighted yesterday (EUR/GBP – No more rate hikes likely from the BoE as inflation hits two-year low), the pair was already looking sluggish on approach to such a key resistance zone, and now today, it appears to be forming a potential bearish candlestick.

The shooting star can be a sign of trend exhaustion, having rallied strongly earlier in the session but ultimately failing to hold onto those gains, perhaps even ending the day negatively. Should that happen, it could be another sign that this resistance zone may hold again.

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