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The Bank of England Raised Interest Rates by 25 Basis Points

3/24/2023 11:24 AM

The EUR/GBP pair shows a slight decrease, developing a corrective impetus formed the day before, when the instrument updated local highs from March 10.

The pound made another attempt to grow following the results of yesterday's session, but the "bulls" failed to consolidate on new highs. The reason for the emergence of upward dynamics was the results of the meeting of the Bank of England, which continued the "hawkish" monetary policy, the day before adjusting the interest rate by 25 basis points and bringing the figure to 4.25%. The decision was quite expected, as data from the Office for National Statistics (ONS) recorded an increase in inflation in February from 10.1% to 10.4% in annual terms, while the forecast was at 9.9%, and in monthly terms from -0.6% to 1.1%, while the Core Consumer Price Index rose from 5.8% to 6.2% YoY and from -0.9% to 1.2% MoM, despite rhetoric of the Bank's officials that the peak of the indicator has already been passed against the backdrop of a correction in wholesale prices for natural gas and the normalization of the functioning of supply chains due to some slowdown in demand. The Retail Price Index also signaled the persistence of price pressure, which rose by 1.2% in February after zero dynamics a month earlier, doubling the market expectations, and in annual terms it corrected from 13.4% to 13.8% with a forecast of 13.2%.

In a follow-up statement, the regulator indicated readiness for additional tightening of monetary policy in the event of a strengthening of the negative dynamics of indicators, although officials still expect a serious slowdown in consumer price growth during the period from April to June.

In the absence of significant economic releases, the movement of the euro is driven by external factors. According to the comments of the President of the Bundesbank, Joachim Nagel, the financial system is gradually recovering from last week's volatility, and the European Central Bank (ECB), in turn, is ready to provide all necessary support in the event of a shortage of liquidity from creditors. The official also pointed to the continuation of the "hawkish" course of the regulator to fight inflation, but noted that in the past, raising interest rates also led to a reduction in the number of jobs, so the authorities need to monitor the dynamics in the labor market, despite the fact that now the Unemployment Rate remains low.

Bollinger Bands in D1 chart demonstrate a moderate decrease. The price range is narrowing, pointing at the ambiguous nature of trading in the short term. MACD is growing preserving a weak buy signal (located above the signal line). Stochastic, having approached the level of "80", reversed into a horizontal plane, reacting to the emergence of "bearish" trading dynamics the day before. The indicator still points to the significant risks of overbought euro in the ultra-short term.

Resistance levels: 0.8841, 0.8863, 0.8894, 0.8926. | Support levels: 0.8800, 0.8775, 0.8750, 0.8720.

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