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Bank of England Holds Rates; Lowers Growth Forecast

The Bank of England (BoE) concluded its monetary policy meeting with a vote to the benchmark interest rate at 0.25%. It also provided forecasts for inflation and growth. According to economiccalendar.com,

"There was a higher forecast for peak inflation late in 2017, but the longer-term inflation forecasts were revised down slightly. and the Bank lowered the 2017 growth forecast. The BoE trimmed its growth forecast to 1.9% from its previous estimate of 2.0% made in February and stated that consumers were being squeezed between sluggish income growth and rising inflation, and that could be seen in weak retail sales and a sharp fall in new car registrations in April."

Here's the official Monetary Policy Summary (pdf)
Here's the official May 2017 Inflation Report (pdf)

The slower growth forecast and the mixed inflation forecast suggests that the BoE will remain dovish for the time being. The market reacted to today's BoE event risk by selling the pound. The GBP/USD for example followed the BoE announcement with a bearish correction.

GBP/USD 4H Chart

(click to enlarge)

Correction:
- Note that price held under 1.30 and formed a double top just ahead of the BoE event risk.
- The market completed this double top after the BoE announcement.
- While the short-term reaction is bearish and we might get some extension of this bearish correction, the overall mode is still bullish. 
- We should monitor the 1.2750-1.28 area for support. 
- But if subsequent rallies start seeing resistance around 1.29, get ready for a longer period of consolidation/bearish correction that has downside risk to 1.26.
- Meanwhile, a break above 1.29 opens up 1.30, and maintains upside risk towards 1.35.