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BoE Meeting Minutes Show Policy Split; GBP - Reactions

The Bank of England (BoE) released its meeting minutes for the August 6-7 monetary policy meeting. The majority of the Monetary Policy Committee (MPC) voted to maintain the current Bank Rate, because "there remained insufficient evidence of inflationary pressures to justify an immediate increase in Bank Rate". 

For dissident voters, Martin Weale and Ian McCafferty, a 25-basis point increase was warranted. They cited evidence of strong recovery, including an improvement in employment. They are also hopeful that wage growth are just lagging, and that inflationary pressure is enough. They noted "an early rise of 25 basis points in Bank Rage, monetary policy would remain extremely supportive, and an early rise would facilitate the Committee's aspiration that the rises in Bank Rate should be only gradual." 

The split ends a 3-year consensus, and can be seen as the first step toward an eventual rate hike, which could be in early 2015. The GBP found some strength after the minutes.

GBP/USD found support at 1.66. It began the week bearish, falling after a soft inflation report. However, only a break above 1.6750 should introduce a consolidation/bullish correction scenario. Otherwise, the pair remains bearish with downside toward the next support levels which are 1.6550, and 1.6465.

(gbpusd 4h chart 8/20)

GBP/JPY rallied and broke above a falling trendline that has held August price action bearish. The RSI is trying to pushing above 60, and price is trying tp push above 172, and clear the 100-period SMA in the 4H chart. The breakout could be a sign that the GBP/JPY is shifting bullish, but for now, we should probably treat it as a shift to a sideways market with resistance around 172.40 and support around 170.50-170.75. 

(GBP/JPY 4H Chart)

The EUR/GBP failed to break above last week's high around 0.8030, and fell after the BoE minutes, essentially starting a bearish correction against a rally since mid-July. It could also be the start of a bearish continuation, but let's first make sure the this week's price action will firmly place a price top and show some bearish signals. For example, the 4H RSI should dip below 30 to show bearish momentum. Price should start holding below 0.80. Then, we can start shifting from a sideways-slightly-bullish mode to a bearish one. 

(EUR/GBP 4H Chart)