After what seems to be a slow week, the GBP is stepping on the gas and rallying-big time. It has been on the cards all along, following Brexit, BoE decided to slash interest rates to record lows in the hope of supporting the then slumping Pound. What followed next was cheap credit for businesses and corporates coupled with more stimulus which caused the inevitable one year late-Rising inflation.
With rising inflation, consumer spending was reduced because of erosion of purchasing power. On the other hand of the coin though, manufacturing/production activity rebounded with caution because of the uncertainty of the terms of Brexit-the access of the Eurozone market was important.
Today things are different and MPC committee members are hawkish and more members including the chairman are leaning towards a rate hike and reducing QE in the coming sessions. If they decide to do so, they will be in tandem with other central bankers like the ECB, BoC and Feds who are advocating for more tightening as they are getting more uncomfortable with the cheap money in circulation.
SNB decided to keep their interest rates unchanged but cut their growth forecast from 1.5% to 1.0%. On the other side of the Atlantic, the US recovered and after boasting positive CPI- 0.4% in August and 1.9% YoY, it soared only to revise shortly after rumors emerged of more missile test in North Korea.
Technically, the Lira has been on a winning streak pretty much the whole of this year. There is a buy signal in the weekly chart and this provides a wonder buy opportunity especially if there are stochastic buys in the 1hr chart.
Trade, depending if conditions are met will be executed as follows:
Buy Limit: 3.4120-3.4260
Stop Loss: Below 3.4120
Take Profit: above 3.4770
Have a good trading day and weekend