British Pound All Over the Place After Rate Hike

The British pound has been all over the place during the trading session on Thursday as the Bank of England raised interest rates by 25 basis points. They also suggested that they will be tapering asset purchases, in an expansion of quantitative tightening. Because of this, the British pound spiked initially after the announcement, but it has given back quite a bit of the gains. Because of this, it does suggest that perhaps there is a lot of hesitation, and if the market cannot gain after all of this, the question is whether or not it can going forward?

GBP/USD Video 04.02.22

Unfortunately, this has not cleared things up, and now we have the jobs number to pay attention to on Friday. This obviously will cause a lot of volatility in the US dollar, which of course has its say as to where we go. The market participants will have to decide whether or not the US dollar should strengthen based upon expectations out of the Federal Reserve, or if the Bank of England seems more hawkish. Quite frankly, the jobs number is a huge part of the equation that the Federal Reserve uses in order to determine monetary policy as it has a dual mandate.

If that is going to continue to be the case, then I think what we have is a situation where the markets can expect more volatility, not less unfortunately, the fact that we are hanging around the 200 day EMA is not doing us any favors either. I anticipate that the British pound may give up some of these recent gains, and if we break down below the 1.35 level IV, a significant seller again.

For a look at all of today’s economic events, check out our economic calendar.